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Newsline - July 16, 1998




DUMA PASSES SEVERAL TAX LAWS...

The State Duma on 16 July passed in the third reading the first part of a new tax code, which outlines the rights and obligations of taxpayers and the tax authorities as well as determining the procedure for introducing, amending, and rescinding taxes, ITAR-TASS reported. Deputies also approved in the third reading government-backed laws to simplify taxation of small businesses and lower the profit tax from 35 percent to 30 percent. The previous day, the Duma approved in all three readings several other parts of the government's anti-crisis program, including a law to allow companies to sell goods below production cost and a law on the land tax. The latter law does not raise the land tax but stipulates that 50 percent of land tax revenues will go to local budgets, 30 percent to regional budgets, and 20 percent to the federal budget, according to ITAR-TASS. LB

...BUT REJECTS SALES TAX AGAIN

The Duma on 15 July rejected for the second time a government-backed law that would have allowed regional authorities to introduce a sales tax of up to 5 percent, "Kommersant-Daily" reported. Deputy Prime Minister Boris Nemtsov has estimated that such a law would bring an additional 40 billion rubles ($6.4 billion) in revenues. LB

DUMA APPROVES IN SECOND READING MEANS- TESTING FOR CHILD BENEFITS

The Duma on 15 July approved in the second reading a law that would grant only low-income families the right to receive child benefits from the state, ITAR-TASS reported. The law is one of many government proposals aimed at cutting budget expenditures. The government has long sought to reduce spending on a wide range of social benefits, but in 1997 the Duma twice voted down legislation to authorize such cuts. LB

DUMA PASSES AMENDMENTS TO PRODUCTION- SHARING LAW...

The Duma on 15 July approved a law changing the December 1995 law on production-sharing agreements (contracts involving investment in natural- resource deposits in exchange for a portion of the resources that are later extracted), Interfax reported. The amendments state that foreign investors can acquire no more than 20 percent of Russia's natural resources through production-sharing agreements and no more than 10 percent of "strategic natural resources." The revised law would demand that production-sharing agreements be approved by regional legislatures as well as federal agencies. A special federal law would be required to approve production-sharing agreements on Russia's most important natural resources. "Kommersant-Daily" on 27 June blasted the proposed amendments, saying they would turn a law aimed at attracting foreign investment into one that scares off potential investors. LB

...AND LAW ON FOREIGN INVESTMENT

Also on 15 July, the Duma passed a law on foreign investment that would replace legislation dating from 1991, "Kommersant-Daily" reported on 16 July. The law contains a watered-down version of a "grandfather clause" that would protect foreign investors for a certain number of years against legal changes that affect their business in Russia. Affiliates of foreign corporations or enterprises that have foreign investment would be allowed to continue operating for an additional seven years under the "conditions for investment activity" that were in effect when they launched operations in Russia. However, the law goes on to state that the government determines the "conditions for investment activity." "Kommersant-Daily" argued that since changes in tax law require parliamentary approval and cannot be implemented unilaterally by the government, the law would not give foreign investors seven-year protection against tax hikes. LB

COMMUNISTS SLAM MEDIA COVERAGE OF MEETING WITH YELTSIN

High-ranking Communist Party officials on 15 July blasted the "distorted" media coverage of President Boris Yeltsin's meeting with Duma deputies the previous day, RFE/RL's Moscow bureau reported. Valentin Kuptsov, who attended the Kremlin meeting, charged that reports broadcast on Russian television networks were prepared by Yeltsin's press secretary, Sergei Yastrzhembskii, and resembled "puppet theater." He said they distorted the essence of the working meeting to make it look like a friendly discussion (see "RFE/RL Newsline," 14 and 15 July 1998). Communist Party leader Gennadii Zyuganov said he no longer wants to participate in "roundtable talks" involving legislative and executive officials. Zyuganov was a leading advocate of regular roundtable talks last year, but he now says Communists realized in March that such talks are useless. He added that the Communist Duma faction will continue to seek Yeltsin's impeachment. LB

OPPOSITION DUMA DEPUTIES CONCERNED ABOUT NEW FOREIGN LOANS

Despite Finance Minister Mikhail Zadornov's defense of Russia's recent loan agreements with international financial institutions, many Duma deputies remain concerned about what Russia promised to the IMF, World Bank, and Japan in exchange for billions of dollars in new credits (see "RFE/RL Newsline," 14 and 15 July 1998). Zadornov told Duma deputies on 15 July that only economic conditions were attached to the loans. He also said the government will send the Duma documents on the new loans as soon as they are available, ITAR-TASS reported. According to "Izvestiya" on 16 July, the Duma passed a resolution demanding that the loan agreements be submitted to the parliament for ratification. Duma Legislation Committee Chairman Anatolii Lukyanov, a prominent member of the Communist faction, sponsored that resolution. LB

SOME NEWSPAPERS CRITICIZE BAILOUT AGREEMENT

"Segodnya," which is owned by Vladimir Gusinskii's Media- Most group, charged on 15 July that one IMF demand attached to its stabilization loan to Russia is aimed at driving Gazprom off the European market. The newspaper argued that giving other companies access to Gazprom's pipeline network would allow Turkmenistan to resume gas shipments to Europe across Russia--a development that would be in the interest of U.S. firms involved in the Turkmen gas industry, the newspaper added. "Tribuna," which is financed by Gazprom, has also criticized the bailout plan. In its 15 July edition, that newspaper questioned whether the bailout is consistent with Russian legislation and argued that the loans will increase Russia's dependence on the West. "Tribuna" and "Nezavisimaya gazeta," which is financed by CIS Executive Secretary Boris Berezovskii, both expressed doubt that the conditions for the new foreign loans will ever be published in full. LB

GAZPROM HEAD DEFENDS SUPPLY CUTS TO NON- PAYING CUSTOMERS

Rem Vyakhirev, the chief executive of Gazprom, spoke in the Duma on 16 July to address concerns about gas supply cuts to some non-paying customers. Vyakhirev said Gazprom was compelled to introduce the cuts, ITAR-TASS reported. Some Gazprom assets may be seized on 1 August if the company does not pay its taxes in full. Vyakhirev told the Duma that Gazprom receives payment for only 13 percent of the gas it supplies to customers in Russia--not enough to cover its tax obligations. He promised that the cuts will affect only enterprises, not homes or the "social sphere" (such as schools and hospitals). "Kommersant-Daily" reported on 15 July that pressure from the government, Unified Energy System head Anatolii Chubais, and governors forced Vyakhirev to drop plans to cut gas supplies to power plants, which are among Gazprom's largest non-paying customers. LB

PART OF ELECTRICITY GIANT'S DEBT TO BE SETTLED WITH OFFSETS

The electricity monopoly Unified Energy System will be allowed to cancel 5 billion rubles ($800 million) of its tax debts against debts owed to the company by the state, "Russkii telegraf" reported on 15 July, citing Vladimir Popov, head of the State Tax Service's department on large tax debtors. Late last year, Yeltsin issued a decree requiring that taxes be collected in cash and banning the cancellation of tax debts against state debts to enterprises (see "RFE/RL Newsline," 10 November 1997). Eliminating such "offsets" is one of the government's stated goals and a long-standing IMF requirement. "Russkii telegraf" noted that last year, when current Unified Energy System head Chubais was a first deputy prime minister, he helped draft the decree banning offsets. "Russkii telegraf" is fully owned by Oneksimbank and provides mostly favorable coverage of the government and Chubais. LB

YELTSIN TO ATTEND TSAR'S REBURIAL...

Yeltsin has announced he will attend the reburial of the remains of Nicholas II in St. Petersburg on 17 July. Yeltsin said the reburial is an "act of humane justice" and a means for Russia to seek to repent of its past. One week after the Holy Synod of the Russian Orthodox Church had decided not to take part in the ceremony (see "RFE/RL Newsline," 9 June 1998), Yeltsin announced that he would not attend either. On 15 July, Deputy Prime Minister Nemtsov's adviser, Viktor Aksyuchits, said that no scientist has challenged the authenticity of the remains and that public skepticism "aggravates the split and standoff in society," ITAR-TASS reported. The wooden coffins of Nicholas II, his family, and their servants are to be flown from Yekaterinburg to St. Petersburg on 16 July. BT

...WHILE DUMA, FEDERATION COUNCIL WILL NOT ATTEND

Neither house of the parliament will be officially represented at the tsar's reburial, Russian news agencies reported. Both Duma Speaker Gennadii Seleznev and Federation Council Speaker Yegor Stroev have expressed doubt about the authenticity of the remains and will not attend the ceremony. Liberal-Democratic Party of Russia leader Vladimir Zhirinovsky also will not attend. Speaking to an RFE/RL correspondent in Moscow on 14 July, Zhirinovsky questioned why Duma deputies should honor a man who disbanded four Dumas when he ruled Russia. Several individual members of the parliament plan to attend the funeral, including Yabloko leader Grigorii Yavlinskii and Krasnoyarsk Krai Governor Aleksandr Lebed. On 14 July, Duma deputy Arkadii Yankovskii of the Russian Regions faction said he will compile a list of deputies who attend the funeral so "the public will know which part of the parliament respects the ceremony and is really set on reconciliation," Interfax reported. BT

GOVERNMENT COMMISSION TO INVESTIGATE DUAL TECHNOLOGY EXPORTS

A session of the government's export commission chaired by Economy Minister Yakov Urinson announced on 15 July that it will to conduct an investigation into suspected violations by Russian firms of restrictions on the export of dual-use technology, ITAR- TASS reported. The items in question include weapons of mass destruction and missiles for their delivery. Also on 15 July, Yeltsin instructed the Duma to expedite the drafting and debate of a law on export controls and of amendments to those articles of the Criminal Code that focus on the illegal export of technology and information used for the manufacture of weapons of mass destruction. LF

YELTSIN SATISFIED WITH WEAPONS EXPORTS

Two days earlier, Yeltsin met with Rosvooruzhenie director Yevgenii Ananev and expressed approval of the arms export company's performance during the first half of 1998, according to "Nezavisimaya gazeta." During that period, Rosvooruzhenie's revenues from arms exports were up by several hundred million dollars, compared with the same period in 1997, Ananev told the Russian president. But "Kommersant-Daily" on 14 July suggested that Ananev may have overstated the total value of recent contracts concluded by Rosvooruzhenie. An official of the arms exports company accompanied Defense Minister Igor Sergeev to Yerevan on 14-15 July (see below). LF

WILL CHERNOMYRDIN RETURN TO HIGH OFFICE?

Yeltsin discussed a wide range of political topics with former Prime Minister Viktor Chernomyrdin on the evening of 14 July, Russian news agencies reported. It was their second meeting since the president sacked Chernomyrdin in March. Speaking to journalists on 15 July, Chernomyrdin ruled out speculation that he may return to the government. However, he said he plans to broaden his activities in Russian politics. An unnamed source close to Chernomyrdin told Interfax that the former premier may soon be named to an "unofficial" but high-status post. "Nezavisimaya gazeta" speculated that Chernomyrdin may be named to a new Consultative Council, which would work to improve relations between the executive and legislative branches. An announcement on Chernomyrdin's future is expected after Yeltsin's vacation later this month. LB

GROUPS FILE COURT CHALLENGE TO RELIGION LAW

Representatives of several religious organizations have filed an appeal with the Constitutional Court challenging the law on freedom of conscience and religious organizations, which took effect last September, "Nezavisimaya gazeta" reported on 16 July. Duma deputies Valerii Borshchev of the Yabloko faction and Galina Starovoitova have expressed support for the court appeal, which charges that the law contradicts both Russian and international legal norms. One of the most controversial aspects of the religion law requires groups to prove they have existed in Russia for at least 15 years in order to be registered with the authorities as "religious organizations." The law restricts the activities of groups that do not meet that condition or other registration requirements. Article 14 of the Russian Constitution states that "religious associations are separate from the state and equal before the law." LB

PRESIDENTIAL GUARD, WAHHABIS CLASH IN CHECHNYA

Dozens of people were killed and injured in Gudermes, east of Grozny, on 14-15 July when members of the Chechen presidential guard clashed with some 1,000 Wahhabis, RFE/RL's Grozny correspondent reported. Members of the Islamic Regiment and the Sharia guard spontaneously converged on Gudermes to lend support to the Wahhabis. Speaking on Chechen Television on 15 July, President Aslan Maskhadov called for concerted action against Wahhabis, who, he said, are "calling for war" and "trying to impose a hostile ideology on the Chechen people," Interfax reported. But Shamil Basaev, who recently resigned as acting Chechen Prime Minister, said he doubts that Wahhabis were involved. In an allusion to maverick field commander Salman Raduev, Maskhadov also criticized local political figures "who having created parties and opened television studios are misleading people and trying to rise to power by any means." LF

KIRIENKO IN MAKHACHKALA

Russian Prime Minister Sergei Kirienko headed a Russian government delegation to Dagestan on 15 July, which attended inauguration of Dagestani State Council Chairman Magomed-Ali Magomedov, RFE/RL's North Caucasus correspondent reported. Magomedov, who was re-elected to that post on 25 June, is regarded by Moscow as a key figure in maintaining peace and tenuous stability in the North Caucasus. Speaking at the inauguration ceremony, Kirienko received a standing ovation for stating that Dagestan will remain a constituent part of the Russian Federation and for promising additional financial aid to deal with the republic's social and economic problems, according to "Kommersant-Daily." Kirienko also held talks with the leaders of several other North Caucasus republics. LF




RUSSIA MAY WITHDRAW PEACEKEEPERS FROM ABKHAZIA...

Russian presidential representative to the CIS Ivan Rybkin On15 July warned that Moscow will withdraw its peacekeeping force from Abkhazia unless Tbilisi and Sukhumi take measures to resolve the Abkhaz conflict peacefully, Interfax reported. The previous day, the Russian Foreign Ministry had said that the peacekeeping force, five of whose members were killed by a mine on 12 July, will be withdrawn unless measures are taken to prevent such attacks on its personnel. Also on 15 July, eight civilians died when their horse-drawn cart ran over a mine in Gali Raion. Abkhaz Security Chief Astamur Tarba told Interfax he does not doubt that both mines were laid by Georgian guerrillas. LF

...WHILE GEORGIA DISCLAIMS RESPONSIBILITY FOR MINE DEATHS

The Georgian Foreign and State Security Ministries have issued a joint statement saying "it is senseless to blame the Georgian authorities for atrocities occurring in a conflict zone controlled by Abkhaz militants and Russian peacekeepers," Caucasus Press reported on 16 July. The statement again denied that there are any Georgian guerrillas in Gali. LF

UN OFFICIAL'S MURDER "NOT POLITICAL"

Georgian Interior Ministry officials said on 15 July that the shooting the previous day of a Polish woman employed by the UN mission in Tbilisi was not a political assassination, ITAR- TASS reported. The woman was shot dead at close range at the door of her apartment, probably by burglars, according to the ministry. UN mission head Liviu Bota discussed the killing on 15 July with Georgian Foreign Minister Irakli Menagharishvili. The Foreign Ministry has since issued a statement expressing regret at the shooting as well as the hope that it will not adversely impact the activities of either the UN or other international organizations in Georgia. LF

SERGEEV WRAPS UP YEREVAN VISIT

Russian Defense Minister Igor Sergeev on 15 July inspected Russian troops stationed at the Kanaker base near Yerevan and on the Armenian-Turkish border, RFE/RL's Yerevan bureau reported. In a joint communique, Sergeev and his Armenian counterpart, Vazgen Sargsian, pledged to continue military cooperation, which they termed "satisfactory" and a factor for peace and stability in the Transcaucasus. Sergeev told journalists before leaving Yerevan the same day that he and Sargsian reached agreement on measures to ensure Armenia's integration into the combined CIS air defense system. Sargsian expressed his thanks for Russia's "invaluable assistance in building Armenia's national army." LF

Aliyev WARNS AGAINST ELECTION FRAUD

Addressing the parliament on 14 July, Azerbaijani President Heidar Aliyev warned that he will hold local administrators responsible for ensuring there are no violations of voting procedures during the October presidential poll, Turan reported. He promised that the rights of all presidential candidates will be respected, regardless of their political orientation. And he called on the country's media to cease propaganda in favor of his re-election for a second term. Former President Ayaz Mutalibov told Turan in a telephone interview on 15 July that he thinks opposition candidates should abandon their declared boycott and participate in the poll in order to preclude political confrontation and build an image of Azerbaijan as a democratic country. LF

AZERBAIJANI OPPOSITION PROTESTS ONGOING HARASSMENT

Two members of the Azerbaijan Democratic Party began a hunger strike on 15 July to protest the trial and sentencing of ADP officials Gurban Mamedov and Jamaleddin Ahmedov on charges of spreading disinformation, Turan reported. Early this month, the two were sentenced to five and nine years' imprisonment, respectively, in connection with a report released by Mamedov that Security Minister Namig Abbasov was preparing to assassinate President Aliyev (see "RFE/RL Newsline," 7 July 1998). Vahdat Party leader Tair Kerimli told Turan on 15 July that his party will begin picketing the Ministry of Justice and call for the resignation of both Minister Sudaba Hasanova and Aliyev if the ministry continues to refuse to register the Vahdat Party. LF

WORRIES ABOUT MORE FLOODING IN CENTRAL ASIA

After the 8 July flood in the Fergana Valley, which left nearly 100 people dead and caused severe damage to the Uzbek section of the valley., efforts are under way to prevent another such tragedy, RFE/RL correspondents in Bishkek reported. The Kyrgyz Ministry of Emergencies has ordered that helicopters fly over lakes and rivers of the country to assess whether there is a risk of flooding. That move follows sharp criticism by the Uzbek government that Kyrgyzstan failed to give advance notice of the recent flooding. In Tajikistan, Russian border guards are helping evacuate citizens living near the Pyanj River in the southern part of the country, ITAR-TASS and "Krasnaya Zvezda" reported on 14 July and 15 July, respectively. The level of the river has risen in places to 50 percent above the normal level. BP

SITUATION SOUTH OF ISSIK-KUL MAY BE WORSE THAN EARLIER REPORTED

While the effects of the 20 May sodium cyanide spill into the Barskoon River are reported to have been dealt with, new questions are arising about the clean-up process, RFE/RL's Kyrgyz Service reported on 15 July. Two weeks after the spill, chloride was first used in the cleanup. Though chloride is typically used in such situations, it must be applied immediately. Reports from hospitals in the area say some local residents have developed a rash, possibly related to the chloride. Moreover, independent experts from the U.S. were unable to reach the Kumtor gold mine, which is held responsible for the spill, to inspect conditions there. The experts were informed that the plane assigned them by the government was unable to fly owing to technical reasons. BP

LARGE WEAPONS HAUL SEIZED IN KAZAKHSTAN

Kazakh police on 12 July seized a large amount of weapons while searching a vehicle, RFE/RL correspondents in Almaty and "Krasnaya Zvezda" reported on 14 and 15 July, respectively. Traveling in the car were two Kyrgyz citizens, one Chinese, and one Turkish. Also in the vehicle were guns, gun powder, electronic detonators, and home- made bombs. Kazakh authorities suspect the group were planning terrorist action. An investigation is under way. BP




BELARUSIAN INDUSTRIAL WORKERS RALLY

Some 5,000 workers from the industrial sector protested declining living standards and demanded wage increases in an authorized rally on the outskirts of Minsk on 15 July, RFE/RL's Belarusian Service reported. The protest was organized by Belarus's major industrial trade unions. A resolution adopted at the rally castigated the government for ignoring demands and suggestions of trade unions, saying the government "is turning our partnership into a farce." It also criticized President Alyaksandr Lukashenka's foreign policy, which, it said, "threatens the country with political and economic isolation," ITAR-TASS reported. The trade unions threatened a nationwide protest action in the fall unless their demands are met. JM

BELARUS SAYS U.S. ESCALATES TENSION OVER DIPLOMATIC RESIDENCES

Responding to the U.S. State Department's announcement of visa restrictions for Belarusian officials (see "RFE/RL Newsline," 15 July 1998), the Belarusian Foreign Ministry has said the U.S. is escalating tension in the dispute over the diplomatic residences at Drazdy. "The statement of the U.S. State Department does not help resolve the conflict or continue a dialogue," Belarusian Radio quoted the ministry as saying on 15 July. The previous day, the Foreign Ministry accused the EU of "double standards" vis-a-vis Belarus and called the ban on visas for Belarusian senior officials an "overtly discriminatory" act. JM

UKRAINE HOPES TO IMPROVE INVESTMENT RATING

Ukraine hopes for an improvement in its investment rating if the IMF grants the country a $2.5 billion loan, Reuters reported on 15 July, quoting presidential adviser Valeriy Litvytskyy. On 13 July, Moody's Investors Service announced it is downgrading Ukraine's credit rating. Moody's said if Ukraine is unable to borrow from financial markets or fails to obtain the IMF loan, the country will run out of foreign currency reserves by the end of this year. Litvytskyy said the IMF praised economic decrees signed recently by President Leonid Kuchma and noted progress in the country's fiscal reform. An IMF mission's visit to Kyiv from 23-31 July will be crucial for the fund's decision on the loan, he added. JM

GERMANY'S KINKEL MEETS WITH BALTIC COUNTERPARTS

Meeting with his Baltic counterparts in the Lithuanian coastal town of Nida on 15 July, German Foreign Minister Klaus Kinkel stressed that his country strongly backs the Baltic states' bids to join NATO and the EU. Kinkel also said Bonn is "convinced that it is of central importance that Russia has the central place that it deserves in Europe," ETA reported. Among the issues on the agenda of the ministers' meeting was visa-free travel between Germany and the three Baltic states. Kinkel said that Germany hopes to conclude agreements on a visa-free regime by the end of the year. According to ETA, the German foreign minister said that accords on the return of illegal immigrants must be signed first, however. JC

GEREMEK SATISFIED WITH FRENCH SUPPORT FOR POLAND'S EU BID

Polish Foreign Minister Bronislaw Geremek says he is "extremely pleased" with his talks with French President Jacques Chirac on 15 July in Paris, AFP reported. Chirac assured the Polish minister that France wants to see Poland in the EU "in the year 2000 or, at the latest, in 2002." Geremek said the reform of EU institutions, which is supposed to precede EU enlargement, "could take place over three months. This will delay Poland's entry into the union only by a few months," "Rzeczpospolita" on 16 July quoted him as saying. At the same time, the Polish minister reproached the "Brussels bureaucracy" for its "instructorial and paternalistic" attitude toward Poland. JM

POLISH GOVERNMENT, OPPOSITION AGREE ON NUMBER OF PROVINCES

Polish politicians have reached a compromise on administrative reform aimed at transferring more power to local government, AP reported on 16 July. After the parliament failed to override the presidential veto on a bill providing for 15 provinces (see "RFE/RL Newsline," 7 July 1998), the Solidarity-led coalition and the leftist opposition agreed on a motion providing for 16 new provinces. The parliament is to review the motion on 17 July. JM

NEW CZECH LOWER HOUSE CONVENES

The Chamber of Deputies held a short inaugural session on 15 July, CTK reported. That meeting was a formality to facilitate the resignation of the caretaker government led by Josef Tosovsky, which is scheduled for 17 July. Freedom Union deputy Stanislav Volak announced that he will challenge Civic Democrat Vaclav Klaus for the role of speaker. Social Democrat chairman and proposed Premier Milos Zeman presented his list of minister candidates to President Vaclav Havel on 16 July. Havel is expected not to voice objections to any of the proposed ministers, despite the fact that he opposes the appointment of at least two of the nominees. PB

CZECH COMMUNISTS SAY SOCIALISTS CAN RELY ON SUPPORT

Miroslav Grebenicek, the chairman of the Communist Party (KSCM), said on 15 July that a government led by Social Democrat Milos Zeman could depend on KSCM support, CTK reported. Grebenicek said that the election "manifestos" of the two parties are 70 percent the same. "Why should we not support [a Social Democrat government], particularly when our citizens want such a change," he said. Grebenicek added that Zeman has assured him that the Social Democrats will adhere to their election platform. PB

AUSTRIAN REPORT CLEARS CONTROVERSIAL SLOVAK NUCLEAR PLANT

Wolfgang Kromp, the head of an international team of nuclear facility experts, said in Vienna on 15 July that Slovakia's Mochovce power plant passed initial safety inspections, an RFE/RL correspondent reported. A U.S. member of the team said that except for two areas--reactor vessel integrity and confinement--the plant's level of safety equals that of nuclear power plants in the West. Initial reports of the Kromp-led investigation prompted Austrian politicians to demand that the plant not open until safety concerns were allayed. Kromp said a complete investigation was not carried out because the operators of the plant denied investigators access to certain areas when they visited in May. Mochovce is 120 kilometers from Austria and even closer to Hungary. PB

HUNGARY CONCERNED ABOUT DELAY IN EU EXPANSION

Hungarian Prime Minister Viktor Orban told visiting Austrian Foreign Minister Wolfgang Schuessel on 15 July that Hungary worries about a possible delay in EU enlargement owing to the EU's internal reforms. Austria currently holds the EU presidency. Orban said Hungary would like to be a member of the EU by 2002, while Schuessel argued that there is no need to set a specific date. Schuessel also met with Foreign Minister Janos Martonyi and announced that EU accession talks with the six "fast-track" countries will begin on 10 November. In other news, the parliament's Foreign Affairs Committee approved the nomination of former Foreign Minister Geza Jeszenszky as ambassador to Washington and Erno Keskeny as ambassador to Moscow. MSZ

HUNGARIAN FINANCE MINISTER UPBEAT ON ECONOMY

Zsigmond Jarai said on 15 July that Hungary's rising productivity is fueling a strong economy, Reuters reported. Jarai said budget revenues are expected to increase by 5 percent, which, he said, could lead to tax cuts in 1999. At a joint press conference, National Bank of Hungary Chairman Gyoergy Suranyi said annual inflation is expected to decrease this year and could be below 10 percent by 2000. PB




NATO UNLIKELY TO INTERVENE IN KOSOVA

Unspecified U.S. Defense Department officials told reporters at the Pentagon on 15 July that the Atlantic alliance is unlikely to take any concrete action in Kosova in the foreseeable future unless "intolerable" atrocities take place there. The spokesmen said that the Serbian forces have slowed their advance recently and a "balance of sorts" has emerged on the ground. Officials stressed that "our goal is to bring about serious negotiations" and that political solutions have priority. The spokesmen said that NATO wants to "take a balanced view" rather than a "one-sided approach" in Kosova, which would be the case if it helped the Kosova Liberation Army (UCK) achieve independence. The UCK "needs to know--and NATO has made this clear and the U.S. government has made this clear--that the cavalry is not coming," the "New York Times" quoted one official as saying. PM

AUSTRIA WANTS BURDEN FOR REFUGEES SHARED

Interior Minister Karl Schloegl said in Vienna on 16 July that "a mass exodus" from Kosova is under way and unlikely to end soon, AP reported. He added that he will tell his counterparts from Germany, Italy, France, and Switzerland when they meet in Gaschurn, western Austria, later the same day that they need to find a "common answer" to deal with what promises to be a "major migration." Schloegl stressed that he fears many refugees will come to Austria, as was the case during the wars in the former Yugoslavia between 1991 and 1995. The minister argued that Austria cannot accept such large numbers of displaced persons again. During those years, some 92,000 refugees went to Austria, the largest number per capita of the resident population in any EU member country. PM

KOSOVAR HELD IN SUSPECTED ATTEMPT ON NANO'S LIFE

Spokesmen for the Albanian Public Order Ministry said in Tirana on 16 July that police arrested 19-year-old Faruk Mazreku two days earlier after catching him in the garden of Prime Minister Fatos Nano. Mazreku, who is a recently arrived refugee from Kosova, told police that he only wanted to talk to Nano. It is unclear whether Mazreku was armed or how he managed to get past security guards, dpa wrote. AFP reported that he was armed with a knife and that he is Kosova-born but a permanent resident of Belgrade. Some Tirana dailies suggested that Mazreku may be acting on behalf of an unnamed "foreign intelligence service" or in league with militant Kosovars angry with what they regard as Nano's "pacifist" policy toward that province. Meanwhile in Paris, OSCE Chairman Bronislaw Geremek said that Kosovar shadow-state President Ibrahim Rugova is losing political ground to the UCK with "every passing day," the Belgrade daily "Danas" wrote. PM

DEMIREL WARNS OF 'SECOND BOSNIA'

Turkish President Suleyman Demirel told the Albanian parliament on 15 July that his country will provide $100,000 to help care for Kosovar refugees in Albania. He added that "we are losing time. I urge the world that Bosnia should not be repeated." He argued that "ethnic cleansing" is taking place in Kosova but noted that he is against "the use of the force. It's true, many times in the Balkans force was exercised to reach a goal, but we are living in peace time.... The people in Kosova are suffering a war [of sorts]. It's not a classic one, but...the consequences so far have been dramatic." PM

ILLEGAL MIGRANT TRAFFIC FROM ALBANIA TO ITALY INCREASING

The Italian Coast Guard has intercepted 15 speedboats carrying some 150 illegal migrants over the past three days, "Gazeta Shqiptare" reported on 16 July. The Coast Guard rescued 19 immigrants from a boat on 15 July after its motor failed. Most of those detained recently are Albanian citizens, but some are refugees from Kosova. FS

ALBANIAN CONSTITUTION COMMISSION WANTS BROAD DEBATE

Sabri Godo, who heads the parliament's Constitutional Commission, told the legislature on 15 July that all Albanians should actively participate in drafting a new constitution. The same day, "Shekulli" and "Gazeta Shqiptare" began publishing a series of articles that will present the entire proposed draft. Meanwhile, the Democratic Party has rejected an invitation to discuss the draft with representatives of the Council of Europe's Venice Commission, which provides expert legal advice. The commission is reviewing the draft basic law at the request of the Albanian parliament. Godo said he expects a parliamentary vote and a popular referendum on the constitution to take place before the end of this year. FS

DJUKANOVIC SAYS 'NO COMPROMISE WITH MILOSEVIC'

Montenegrin President Milo Djukanovic said in Podgorica on 15 July that he "recently" spoke to Yugoslav President Slobodan Milosevic but that the two men did not reach a compromise on the key political issues that divide them. Djukanovic stressed that his government continues to refuse to recognize his arch-rival Momir Bulatovic as Yugoslav prime minister, an RFE/RL correspondent reported from the Montenegrin capital. Djukanovic warned that any attempts to "entangle" the Yugoslav army in the crisis in Kosova would be a "tragedy" for all of Yugoslavia. Also in Podgorica, spokesmen for the Montenegrin Helsinki Committee for Human Rights demanded that the government give a full explanation of the role of the military in Kosova. The spokesmen charged that some Montenegrin troops have been sent there against their will. PM

UN EXTENDS PREVLAKA MANDATE

The UN Security Council voted in New York on 15 July to extend the mandate for UN military observers in the Prevlaka region of Croatia for an additional six months. The resolution confirmed the "sovereignty and territorial integrity of Croatia within its internationally recognized frontiers." Croatian Ambassador to the UN Ivan Simonovic hailed the resolution, RFE/RL's South Slavic Service reported. He stressed that it shows the UN considers the Prevlaka dispute between Zagreb and Belgrade not to be one of borders, but rather one of security. Prevlaka belongs to Croatia but controls access to Yugoslavia's only deep- water naval base, which is located in Kotor Bay. PM

ROMANIAN PRESIDENT ADDRESSES JOINT SESSION OF CONGRESS

Emil Constantinescu told a joint session of the U.S. Congress that his country is the key to stability in southeastern Europe and should become a member of NATO in order to realize that role, an RFE/RL correspondent reported on 15 July. Constantinescu said that Bucharest needs the support of Washington. He added that Romania currently meets all the qualifications needed for NATO membership and wants to join a community of nations "bound by freedom, human dignity, and prosperity." Constantinescu is due to meet with President Bill Clinton and other senior U.S. officials on 16 July. PB

LEADER OF ROMANIAN RIOTS DEFIES AUTHORITIES

Romanian miners' leader Miron Cozma, who was recently freed from prison, has defied a two-year ban on visits to Bucharest, Reuters reported. Speaking in the capital on 15 July, Cozma called the ban reminiscent of "Communist-era practice." In June, Cozma finished serving a 15-month sentence for charges linked to the disruption of rail traffic during a labor protest in 1996. He is well known for his part in leading the riots in Bucharest in 1990 and 1991 that caused the first post-Communist government to fall. Cozma, now a member of the chauvinist Greater Romania Party, said he was sorry for the riots, in which several people were killed and dozens injured. PB

ETHNIC TURKS CAUGHT FLEEING BULGARIA

Bulgarian police detained 56 ethnic Turks on 15 July trying to cross into Turkey, AP reported. The arrests were made at the Kapitan Andreevo border crossing, southeast of Sofia. Many of them paid hundreds of dollars each to be smuggled into Turkey. Ankara tightened visa requirements for Bulgaria's 800,000 ethnic Turks in 1990. Some 300,000 ethnic Turks emigrated to Turkey in the late 1980s after the ruling Communists forcibly Slavicized Turkish names. PB




SOME CZECH COMPANIES PUSH AHEAD, DESPITE POLITICAL MALAISE


by Breffni O'Rourke

It is often said that Italy runs better without a government than with one. In the last half century, Italian governments have averaged less than a year in office, making long-term policy planning largely impossible.

But despite many flaws, Italy has made enormous economic progress within one generation, lifting large sections of its population out of post-war poverty to today's comfortable standard of living.

The explanation must lie in the fact that the Italian business world simply bypassed the squabbling politicians. Using their traditions of artisanship, enterprise, and hard work, they went ahead with making money and creating jobs. And when inefficient bureaucracy got in the way, there were, of course, always means of keeping officials content.

In the Czech Republic today, there seem to be some parallels with Italy. As in the Mediterranean country, the electoral process in the Czech Republic has produced fragmentation so that no one party can hope to build a strong government. Premier Vaclav Klaus's center-right coalition collapsed after a long period of paralysis and internal dissension. A temporary government of technocrats took over and has performed well, but it has been unable to continue broad reforms or give the country a long-term perspective for economic planning. Following inconclusive elections last month, it seems likely that a left-wing minority government will be supported in office by its rightist opponents.

Meanwhile, the country is practically rudderless, with the economy at zero growth or less, wages falling, and joblessness growing. Foreign investment is down to a trickle. But all is not gloom and doom. There are surprisingly positive results being achieved by major Czech companies that have shaken off old inefficient ways. And others that have not yet thrown off the stifling blanket of pseudo-privatization are trying to follow their example.

The industrial national flagship is the Skoda automobile company, based in Mlada Boleslav. Owned by Volkswagen Group of Germany, Skoda has been transformed in a few years to a profit maker, and although sales on a depressed domestic market are diving (by 16 percent), they are rising steeply in the competitive West European market (by 11 percent). In Italy, in particular, sales of the stylish new Skodas are soaring.

A massive infusion of German expertise and capital has been the driving force behind Skoda's revitalization, although the Czech workers and managers are proud of their speedy adaptation to new ways. But other major Czech companies have stood their ground without a top- line foreign partner. One is CKD Holdings of Prague, the transport engineering conglomerate. The company says that every third tram in the world is from CKD. Since privatization in 1994, CKD has carried out a rigorous restructuring program to enable it to face the world.

CKD press spokesman Richard Pazout says that "unlike most companies in the Czech Republic, we have started a real, strict restructuring process, cutting down on the number of our businesses, concentrating on the core activities that we can compete with on the world market."

The company now concentrates on five core industries, including rail transport and environmental technology, and its staff has been cut from 20,000 to 14,000. Profit after tax last year was some $10 million on a turnover of some $360 million. That contrasts with heavy losses in 1996 after provision had to be made for Russia's non-payment of a huge 1991 order for locomotives. CKD's biggest market is still the Czech Republic, but it has a worldwide presence and one of its biggest current orders is trams worth $100 million for the Philippines.

Another, even bigger Czech concern is the Skoda Limited group, which employs 35,000 people in a many- sided business empire based on heavy engineering. Skoda Limited, headquartered in Plzen, is not related to the car company. In recent years, it has embarked on a program of acquisitions outside its core activities and, in some cases, even outside the country. Thus in 1996, it took over the famous but deeply indebted Tatra truck concern as well as the troubled car press-maker Umformtechnik Erfurt, based in eastern Germany. This expansion into non-core areas contributed to the dissipation of the group's energies, and last year losses amounted to some $38 million.

Under increasing pressure from its bank creditors, Skoda now says it is moving toward big-scale restructuring, including the sale of its new acquisitions. Executive Vice President of Technology Jan Musil says emphasis in future will be strictly on the core activities, including metallurgy, transport systems, and power generation equipment. Six product areas will be ended.

Musil says that preliminary results for the first part of this year indicate a group profit. And he says restructuring will begin in earnest: "We are selling many old production areas, which should give a total saving of 2.5 billion crowns [more than $80 million]. We want to remove old production areas [and] old equipment since this year we plan to close two or three Skoda companies because we must [use] our money for technical development and production only in the core businesses."

So, as the politicians bicker in Prague, the country's heavy industry is learning to fend for itself in the new era. The author is an RFE/RL senior correspondent.


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