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Newsline - October 1, 1998


The draft version of Deputy Prime Minister Yurii Maslyukov's economic plan, according to "Kommersant Daily" on 30 September, calls for a fixed ruble rate, a 60 percent increase in the money supply, and the nationalization of banks to fund failing industries. The cabinet was scheduled to discuss the plan on 1 October, and the debate may grow heated -- particularly since Central Bank chairman Viktor Gerashchenko told Interfax that he does not support a nationalization of the nation's commercial banks and that the Central Bank will allow the ruble's exchange rate to float. However, a compromise may already be in the works. Gerashchenko told reporters that he supports the idea of a state bank for reconstruction and development; the only problem, he added, is how to provide this bank with funds. JAC


By 30 September, Russian President Boris Yeltsin had filled all the major posts in the cabinet, except for the one abandoned by Aleksandr Shokhin last week. Among the latest appointees are rector of the Patrice Lumumba University Vladimir Filippov, who will become minister of education, Director of the Russian State Library Vladimir Yegorov (minister of culture), Deputy Health Minister Vladimir Starodubov (minister of health), and President of the Union of Russian Cities Valerii Kirpichnikov (minister of regional policy). Yeltsin also reappointed Yevgenii Adamov as minister of atomic energy and Viktor Semenov as minister of food and agriculture. JAC


Yeltsin also appointed Sergei Kalashnikov, a member of the Liberal Democratic Party (LDP), as minister of labor. A moderate, Kalashnikov is the only member of the cabinet from the LDP. In an interview with "Trud" on 1 October, Kalashnikov declared his support for indexing pensions as soon as November. After Kalashnikov's appointment was announced, LDP leader Vladimir Zhirinovsky declared that Primakov's entire cabinet has his party's full backing. JAC


Sverdlovsk governor Eduard Rossel told reporters on 1 October that he suggested to President Yeltsin that a firm top-down management system be introduced in Russia. Rossel also said that Yeltsin promised that the role of governors in federal policy-making will be considerably enhanced. "Kommersant-Daily" concluded on 30 September that the appointment of Kirpichnikov as regional policy minister indicates that the Primakov has decided to adopt a "tough approach" to the regions. According to the newspaper, Kirpichnikov is one of the "founding fathers" of the movement for strong local self-government in which municipal authorities provide a counterweight to governors. JAC


One day before the army conscription campaign was scheduled to begin, a number of Russian newspapers reported on 30 September that the various military districts have not yet received their back wages, despite Prime Minister Yevgenii Primakov's earlier announcement that the government has cleared its debt to the military. According to "Izvestiya," the airborne, air defense, and strategic missile troops as well as the navy and General Staff have so far been paid only for June. In an interview with "Krasnaya zvezda" on 29 September, Duma Defense Committee chairman Roman Popkovich pledged that the "1999 budget won't be approved if the government doesn't increase the size of allowances for servicemen by 2.06 times." He added that allowances have not increased since 1995. JAC


In an interview with "Komsomolskaya pravda" on 30 September, Foreign Minister Igor Ivanov addressed the question of the future of Russian foreign policy in the context of both its current economic crisis and the prospect that its wishes for a solution in Kosova will be ignored by the international community. Ivanov said that Russian diplomacy, deprived of "a dynamic economy behind it," has to rely more on skill, "the skill of seeking compromises, of considering the interests of different states on different issues, of seeking allies." He added that Russia "does not dictate" but is "an important player on the very complex chessboard" of international diplomacy. He expressed "optimism" that the Baltic States' desire to enter the EU will encourage them to observe human rights and that Afghanistan's "friends and allies" will implement accords meant to isolate the Taliban, forcing them to negotiate a peace treaty under UN auspices. JAC


A Moscow arbitration court on 30 September froze the assets of U.S. investment bank Lehman Brothers held in Russian banks. On 24 September, Lehman Brothers had a British court freeze the assets of Uneximbank and Inkombank held in British banks, which reportedly owe them $87 million and $25.9 million, respectively, for unfulfilled forward contracts (agreements to buy a certain amount of currency at a future date, see "RFE/RL Newsline," 24 September 1998). On 28 September, Lehman obtained an additional court order freezing the British bank accounts of SBS-Agro bank, which it claims owes it $15 million. Bloomberg reported on 30 September that the agenda of Russian government talks with domestic and foreign holders of defaulted treasury bonds has been expanded to include discussion of the settlement of more than $10 billion in currency forward contracts. JAC


The Moscow Post Office has stopped accepting parcels to be sent to remote regions because of a dispute between the Communications Ministry and the Railroads Ministry, according to "Segodnya" on 30 September. "Izvestiya" had reported on 26 September that the Post Office, which is overseen by the Communications Ministry, owes the Railroads Ministry 210 million rubles ($13 million) and that the Railroads Ministry responded by halting all services at midnight on 25 September. The "Moscow Times" reported on 1 October that the Post Office has brought in trucks to deliver mail to regions within 2,000 kilometers of Moscow but because of the lack of train access, little mail is making it past the Ural Mountains. The same newspaper reports that Post Office Director Valerii Sokolov believes the Railroads Ministry manufactured the dispute in order to steal shipping business away from the post office, since some citizens have resorted to paying train conductors to deliver parcels. JAC


In an interview with Interfax on 30 September, Communist Party leader Gennadii Zyuganov appeared to confirm earlier press speculation that the Communist Party is forming an alliance with Moscow Mayor Yurii Luzhkov. He said that a center-left coalition with Luzhkov is "possible" and that the creation of a broad center-left coalition "would benefit everyone." Zyuganov admitted that Luzhkov has support not only in Moscow "but also in the republics, territories, and regions with which he deals actively." But he told NTV it is unlikely that his party would support Luzhkov for president. LDP party leader Vladimir Zhirinovsky said he himself would beat Luzhkov in a second round by 2 percent. Meanwhile, "Segodnya" reported that the Moscow Mayor's Office will obtain 25 percent of the stock of "Literaturnaya gazeta" Publishers by providing them with a 49-year lease to a local building. JAC


"Moskovskii komsomolets" reported on 1 October that the previous day's protests by Communist Party activists and trade union members on highways leading to Moscow "amounted almost to nothing" (see "RFE/RL Newsline," 30 September 1998). According to the newspaper, protesters on one highway managed to get past assembled policemen but were chased away by angry truck drivers. JAC


"RFE/RL Newsline" of 30 September incorrectly identified Dmitrii Ayatskov as governor of Sverdlovsk. He is the governor of Saratov.


In his annual address to the parliament on 30 September, Nursultan Nazarbayev outlined broad measures to expedite democratization that are clearly intended to undercut support for any potential challenger in the presidential poll due in 2000. Nazarbayev proposed curtailing the powers of the president and increasing those of the parliament, making the government more accountable to the parliament, enhancing the independence of the judiciary by appointing a separate head of the Supreme Court (that post is currently held by the country's president), and privatizing some state-owned media, Interfax and Reuters reported. Nazarbayev also advocated reforming the procedure for elections at all levels by abolishing the present minimum 50 percent turnout and all fees to register as a candidate and creating 10 additional seats in the lower house, where all seats will be allocated under the proportional system. LF


Nazarbayev categorically rejected a proposal by four parliamentary deputies to bring forward the date of the next presidential elections to 1999 so they are not overshadowed by the presidential poll in Russia in 2000, AP and Reuters reported. The deputies also reasoned that preterm presidential elections are needed to prevent the current social and economic instability in Russia spilling over into Kazakhstan. But Nazarbayev, who has repeatedly affirmed in recent weeks that the financial crisis in Russia has not affected Kazakhstan, said the country's constitution takes precedence over such arguments. LF


Nazarbayev told journalists in Astana after addressing the parliament that he will soon submit to lawmakers a draft law introducing the private ownership of land, Interfax reported. He said that initially, some 30 - 40 million hectares of arable land will be sold, but only to citizens of Kazakhstan who have demonstrable expertise and experience in the agricultural sector. LF


Nazarbayev also met in Astana on 30 September with former Prime Minister Akezhan Kazhegeldin, RFE/RL's bureau in the Kazakh capital reported. At joint press conference, Kazhegeldin described Nazarbayevs democratization program as "timely." Nazarbayev, however, declined to answer a question posed by an RFE/RL correspondent about the very close similarities between the measures he had proposed to the parliament and recommendations that Kazhegeldin had made to the parliament on behalf of his businessmen's union two weeks ago. LF


National Security Committee chairman Mukhamet Nazarov disclosed on 29 September that 760 foreigners have been deported from Turkmenistan so far this year for violating the country's laws. He added that "administrative measures" have been taken against another 1,840 foreigners, "Noviye izvestiya" reported. Nazarov added that 50 Turkmen officials, mostly from the banking sector, have been arrested so far this year. LF


During talks in Tbilisi on 30 September with Georgian Foreign Minister Irakli Menagharishvili and parliamentary speaker Zurab Zhvania, NATO Secretary-General Javier Solana said that security in the South Caucasus goes beyond the purely military sphere and depends also on political and economic factors, Interfax reported. Solana expressed the hope that close regional cooperation may contribute to stability and to a solution to existing conflicts, which, he said, might otherwise present a serious obstacle to European security. In Baku later that day, Solana met with Azerbaijani parliamentary speaker Murtuz Alesqerov and President Aliev, who complained of Russia's "destabilizing" role in the Caucasus, Reuters reported. In particular, Aliyev condemned the presence of Russian military bases in neighboring Georgia and Armenia and Russian arms supplies to Armenia. Solana said he hopes that the OSCE will be able to mediate a settlement of the Karabakh conflict. LF


In a recent letter addressed to the Council of Europe, former parliamentary speaker Babken Ararktsian, who heads the Hanrapetutyun parliamentary faction, protested the recent dismissal of the head of the Armenian delegation to that organization and cast doubts on the delegation's legitimacy, RFE/RL's Yerevan bureau reported on 30 September. Hanrapetutyun deputy Hovannes Igitian headed the delegation until his replacement in August by Armen Martirosian of the Reforms parliamentary group, who is an ally of current parliamentary speaker Khosrov Harutiunian. Martirosian told RFE/RL that Ararktsian's action is "inadmissible," and that it damaged Armenia's efforts to become a full member of the Council of Europe. He added that the council's Parliamentary Assembly has postponed recognition of his delegation's status until after a fact-finding visit to Armenia in November. LF


Opposition supporters were forcibly prevented by police on 30 September from staging a march and protest rally near the parliament building. The Baku mayor had refused permission for the opposition to march along their proposed route but suggested an alternative. Several hundred police intercepted and beat some of the estimated 5,000 marchers as they approached the parliament building. The opposition continues to demand the postponement of the 11 October presidential elections in order to ensure they are held in free and fair conditions, the release of persons arrested during the 12 September clashes with police in Baku, and an international investigation into the alleged use of torture in Azerbaijani prisons. Also on 30 September, the Azerbaijani parliament voted by 86 to 2 to adopt a statement condemning the opposition's activities as violating public order, provoking confrontation, and damaging Azerbaijan's international image, Turan reported. LF


Russian Nationalities Minister Ramazan Abdulatipov, Chechen Vice President Vakha Arsanov, and representatives of Muslim organizations in Russia, Ukraine, and Central Asia are among the delegates to the 10th Congress of Muslims of the Caucasus, which opened in Baku on 30 September, Caucasus Press reported. Addressing the congress, Azerbaijani President Heidar Aliyev said that stability in Dagestan is crucial for the entire Caucasus, and he expressed support for his Georgian counterpart Eduard Shevardnadze's "Peaceful Caucasus" initiative. Chechen mufti Haji Akhmed Kadyrov blamed Moscow for what he termed the "very tense" situation in the North Caucasus. He argued that Russia is encouraging Wahhabism, which he described as a serious threat to Islam, pointing to Interior Minister Sergei Stepashin's pledge not to take legal action against the inhabitants of two Dagestani villages that recently proclaimed an independent Islamic territory (see "RFE/RL Newsline," 4 September 1998). LF


The press service of the Defense Ministry of the unrecognized Nagorno- Karabakh Republic issued a statement on 28 September denying that two Armenians were killed during an attempt to infiltrate Azerbaijani positions east of Karabakh earlier that day, Noyan Tapan reported (see "RFE/RL Newsline," 30 September 1998). The Armenian statement also rejected claims by the Azerbaijani Defense Ministry that Azerbaijani positions in Ter-Ter Raion came under artillery fire on 27 September. LF


The Supreme Council on 30 September rejected the government's 1999 draft budget as "unacceptable," Ukrainian Television and Ukrainian News reported. Lawmakers instructed the cabinet to draft a new budget that would take into account the recent fall of the hryvnya exchange rate and higher inflation. Finance Minister Ihor Mityukov agreed that the budget was unrealistic because it was prepared on the basis of economic indicators in June and July, well before the current crisis hit the country. In particular, the document provided for 19.2 billion hryvni ($5.7 billion) in revenues and 22.9 billion hryvni in expenditures, with a budget deficit equal to 0.6 percent of GDP. Mityukov said the cabinet will seek to submit a new draft budget by mid-October. JM


Ukraine plans to buy an additional 5 billion cubic meters of gas from Russia this year, Ukrainian Television reported on 30 September. Ihor Bakay, head of Ukraine's gas and oil monopoly Naftohaz Ukrayiny, said a number of Ukrainian enterprises will have no gas supplies in the last quarter of 1998 unless the purchase is made. According to AP, the government wants to pay for half of the gas in cash, while the form of payment for the other half is under consideration. JM


Lennart Meri has issued a statement saying that he regrets the resignation of Foreign Minister Toomas Hendrik Ilves in the current situation, ETA reported on 30 September. "Estonia [currently] needs consistency in foreign politics, on the one hand, in the constructive creation of relations with Russia, which is in the middle of an economic and political crisis, and on the other hand in developing relations with the EU," Meri commented. At the same time, he acknowledged that Ilves and his People's Party had appeared to be "in a rather ambiguous situation as it is impossible to be in opposition and in government at the same time." Ilves submitted his resignation on 30 September explaining that he did not have the full support of the ruling coalition. Prime Minister Mart Siimann must decide whether to accept Ilves's resignation within one month. JC


A car exploded in downtown Riga in the early hours of 1 October, BNS reported. One person was injured in the blast. Criminal police chief Aloizs Blonskis is quoted by the news agency as saying the cause of the incident is not yet known. He added that there were no traces under the vehicle that are usually left from explosives. General elections and a referendum on amendments to the controversial citizenship law are scheduled to take place in Latvia on 3 October. JC


The Conservative parliamentary group has said it will not support launching impeachment proceedings against parliamentary deputy Audrius Butkevicius, who is currently in jail awaiting trial on charges of attempted large-scale fraud, BNS reported on 30 September. The faction argues that under parliamentary statutes, such proceedings cannot be launched if criminal charges are being brought against the defendant. In this connection, it cites a clause in the statutes stating that parliamentary deputies can either give permission for the arrest of a deputy suspected of committing a crime or launch impeachment proceedings in the parliament. The Conservatives say they will seek other ways to speed up Butkevicius's trial. JC


Two weeks before starting preliminary negotiations on agricultural issues with Poland, the EU has published a "gloomy" report on the Polish agricultural sector, "Gazeta Wyborcza" reported on 1 October. According to the EU study, Poland has 2.04 million farms, but only 300,000 of them are larger than 10 hectares and yield enough money for further development. The average yearly income of a family farm in Poland is 2,500 ecus ($2,137) compared with some 17,500 ecus in the EU. The agricultural sector accounts for only 6 percent of Poland's GDP, despite the fact that it involves 26.7 percent of the population. The EU report, however, concludes optimistically that Poland's farming will conform with EU standards, but "gradually, without rapid changes." JM


The Polish Supreme Court on 30 September ordered the retrial of 22 riot policemen charged with killing nine miners who took part in sit-in strikes under martial law in December 1981. In November 1997, the Provincial Court in Katowice said the evidence was inadequate and acquitted 11 policemen; the other 11 were found guilty of using weapons but went unpunished under the statute of limitations. Prosecutors appealed the verdict, which caused widespread public discontent in Poland. The Supreme Court cited procedural mistakes in the original trial as a reason for relaunching legal proceedings. JM


The daily "Mlada Fronta" on 30 September quoted State Department spokesman Lee McClenny as saying Secretary of State Madeleine Albright was "very pleased" that Vaclav Havel had suggested that she succeed him as Czech president (see "RFE/RL Newsline," 24 September 1998). But McClenny added that Albright "already has a job she likes very much and she is not looking for another job," AP reported. MS


Prime Minister Vladimir Meciar, in an interview on Slovak television on 30 September, conceded defeat in last week's general elections and said he will resign as premier on 27 October. He also said he will not be seeking any post in a future cabinet, which, he said, would be formed by a coalition of the parties now in opposition, RFE/RL's Bratislava bureau reported. Earlier on 30 September, Foreign Minister Zdenka Kramplova submitted her resignation, Reuters reported, citing TASR. No reason for her decision was mentioned, and Kramplova was unavailable for comment. MS


The two leading opposition parties have completed the first round of talks on forming a new government, Reuters reported on 30 September. The right-leaning Slovak Democratic Coalition (SDK) and the Party of the Democratic Left (SDL) said they are determined to cooperate in forming the new coalition and will continue talks, but no concrete results will be announced before 6 October. SDK leader Mikulas Dzurinda said the two parties have "decided to work together on a government program and a program for coalition cooperation." SDL chairman Jozef Migas said his party is ready to talk with Vladimir Meciar's Movement for a Democratic Slovakia "only about the transfer of power." He said the next Slovak government is going to be one of "truth, safety, and normal relations for the citizens of Slovakia." MS


Commenting that the recent Slovak elections reflect "a clear desire" for change, State Department Spokesman James Foley on 30 September urged all concerned to make the transfer of power "orderly and expeditious," an RFE/RL correspondent in Washington reported. Also on 30 September, European Commission spokeswoman Lousewies van der Laan said the commission is "pleased" with the strong showing by the opposition in the recent elections but cannot reward Slovakia by accelerating talks for its membership in the EU. Van der Laan said that the commission "will be looking for concrete steps from Slovakia to improve its human rights record," and she singled out Hungarian minority rights as well as general democratic rights. MS


"RFE/RL Newsline" of 30 September incorrectly identified Jan Langos as deputy chairman of the Party of the Democratic Left. Langos is the former chairman of the Democratic Party and currently deputy chairman of the Slovak Democratic Coalition.


"Hungary is not seeking to bring forward the date of NATO expansion but welcomes all moves that point in that direction," Janos Martonyi told Hungarian media on 30 September after returning from New York. He said he agreed with U.S. Under Secretary of State Strobe Talbott that "the normal pace of events" will be followed in NATO expansion, which, he added, is "more of a technical issue than a political one." Martonyi also welcomed the outcome of the Slovak election, saying that if the opposition succeeds in setting up a new government, it will be "a decisive development" both domestically and for Slovakia's Euro-Atlantic integration. MSZ


Foreign diplomats are investigating reports of a recent massacre of Kosovar males at Golubovac, "The New York Times" wrote on 1 October. "The Guardian" reported that Serbian police and Yugoslav armed forces tricked refugees into returning to Vraniq on 27 September. The Serbs then killed some of the refugees, arrested some 300 males, and looted and destroyed the refugees' vehicles, the London daily wrote. The reports of atrocities emerged one day after eye- witness accounts of the killing of 18 Kosovar civilians at Obrinje (see "RFE/RL Newsline," 30 September 1998). PM


Referring to the reports about Obrinje, a Serbian police spokesman said in Prishtina on 30 September that the massacres "could not have happened." He added that this is because paramilitary police officials send him reports on their activities and he has no record of such killings. In Belgrade, the state-run Tanjug news agency called the Obrinje story a "foreign media farce." PM


In Blackpool on 1 October, Foreign Secretary Robin Cook told the BBC that "Britain is ready to act [militarily].... It's beginning to look like the only language [Yugoslav] President [Slobodan] Milosevic will listen to is the threat of force." The previous day, he said of the Obrinje killings: "this was not an act of war. It was plain cold murder.... NATO is now ready to act. Milosevic would be making a big mistake if he did not recognize the revulsion across Europe at this latest atrocity." PM


Cook telephoned his U.S. and EU counterparts on 30 September and then announced that the UN Security Council will meet on 1 October to discuss Kosova. That body is unlikely to take any firm steps for at least one week, however, until Secretary-General Kofi Annan issues a report evaluating whether Milosevic has met demands by the international community regarding the Serbian offensive in Kosova. "The New York Times" suggested on 1 October that France as well as Russia may oppose any calls for NATO military intervention. In Moscow, State Duma Speaker Gennadii Seleznev said that any NATO intervention could lead to a "real war" between the alliance and Yugoslavia and to a crisis in NATO-Russian relations. PM


Top officials of the U.S. State Department and its counterparts in Canada, Austria, France, and Italy have condemned the murders. A State Department spokesman on 30 September said that the Obrinje reports indicate the "brutality" that the Serbian authorities are capable of using against their own citizens, while Canadian Foreign Minister Lloyd Axworthy noted that the "Serbian police...are decimating the civilian population." Austria, which holds the rotating EU presidency, said in a Foreign Ministry statement that in view of the "bestial situation of this massacre, certainly the killing of women and children, a delegation of international experts must conduct an investigation." The French Foreign Ministry noted in a statement that Paris "again stresses the seriousness of the situation and confirms that all options, including military ones, remain open." An Italian Foreign Ministry statement said that "there can be no justification" for the murders. PM


In Bonn, the outgoing cabinet on 30 September agreed that Germany will supply 14 aircraft and 500 military personnel for any NATO intervention in Kosova. In Washington, a Pentagon spokesman said the "the clock is ticking" for possible NATO strikes against Serbian military targets. But other unnamed Pentagon officials told AP that military intervention is not imminent. One source argued that, after NATO aircraft attack Serbian anti-aircraft batteries, "you can go after the tanks, but then the Serb forces can hide in the mountains." The official also warned that NATO intervention could endanger the lives of displaced persons in Kosova. In Brussels, an unnamed NATO official told Reuters that any decision to intervene will first require a "good, objective assessment of the situation on the ground." PM


In Belgrade on 30 September, conference organizers announced the postponement of a symposium on media freedoms slated for 2 October in the Serbian capital. The reason for the decision was that the Serbian authorities refused to issue visas to foreign participants, independent Radio B-92 reported. Elsewhere, Milosevic met with Republika Srpska President-elect Nikola Poplasen and the new Serbian representative on the Bosnian joint presidency, Zivko Radisic, to discuss future cooperation between Belgrade and the Bosnian Serbs. Throughout Serbia, most electricity supplies was temporarily cut off by an earthquake that measured 5.7 on the Richter scale. Its epicenter was in Valjevo, but it was felt as far away as Montenegro and Banja Luka. Many Serbs mistook the earthquake for NATO air strikes, RFE/RL's South Slavic Service reported. PM


In Mostar on 30 September, a spokesman for the international community's Sir Martin Garrod charged local Croatian authorities with having "done nothing" to enable Serbian refugees return to their homes in Rastane. The spokesman also said that local Croatian media are discouraging any refugees from going back to homes in areas controlled by other nationalities, "Oslobodjenje" wrote. In Zagreb, a representative of the European Commission said that Croatia can join the PHARE aid program only after it changes its electoral law and opens up state-run television to opposition points of view, according to "Jutarnji list." Elsewhere, representatives of Croatia's three largest railroad unions agreed to work together in collective bargaining with management, RFE/RL's South Slavic Service reported. And in Rijeka, "Novi List" called President Franjo Tudjman's recent declaration of his assets a "farce." PM


In Tirana, Prime Minister-designate Pandeli Majko said on 30 September that he hopes to have his cabinet list drawn up by the end of the following day. Opposition leader and former President Sali Berisha told 2,000 supporters that Majko is only a "puppet" of former Prime Minister Fatos Nano and that the new cabinet will be a "terrorist government." Berisha added that the Democrats want President Rexhep Meidani to appoint a caretaker government in order to organize new elections. In Washington, a State Department spokesman called on Albanian leaders to "address the political polarization that has characterized [political life in Albania] over the past year." In Brussels, OSCE officials announced that 23 countries and eight international organizations have set up a "forum" called "Friends of Albania" to provide political and economic assistance aimed at promoting reform in that country. PM


The government on 30 September announced it will set up a "multicultural" university with tuition in Hungarian and German, RFE/RL's Bucharest bureau reported. The new university is to be named "Petofi-Schiller" and supervised by the Ministry of Education. Bela Marko, chairman of the Hungarian Democratic Federation of Romania (UDMR), said the decision shows the government's "intention to solve the crisis." The UDMR's Operative Council said later that the party's Council of Representatives will decide at its 5 October meeting whether to accept the compromise offer. The council had earlier announced that the party will leave the coalition if the university dispute is not solved by 30 September. MS


A summit meeting between President Petru Lucinschi and separatist leader Igor Smirnov scheduled for 1 October in Tiraspol was canceled by the Transdniestrian side just hours before it was due to start, Infotag reported on 30 September. The two leaders were to have discussed bilateral economic relations,. But the separatist authorities said the meeting had been "poorly prepared," and they blamed Chisinau for failing to produce necessary documentation at the previous summit meeting in June and at the 22 September meeting at government level. In other news, Lucinschi and the head of the OSCE mission to Moldova, John Evans, met on 29 September and urged that negotiations on the status of the separatist region be resumed, the independent Flux agency reported on 30 September. MS


Heads of Orthodox Churches from several countries met in Sofia on 30 September to discuss ways of overcoming the schism within the Bulgarian Orthodox Church. The pan-Orthodox convention is chaired by Ecumenical Patriarch Bartholomew I, the spiritual leader of Orthodox Christians, AP reported. Since 1991, the Bulgarian Church has been split between supporters of Patriarch Maxim, who served as Church leader under the communist regime, and Pymen, whose followers seceded that year and proclaimed him patriarch in 1996. Patriarch Maxim subsequently declared that Pymen had been expelled from the Church. Pymen's supporters accuse Maxim of serving the secret police under communism. MS


by Julie A. Corwin

The father of Russia's commercial banking system, Central Bank chairman Viktor Gerashchenko, has returned to oversee his creation. So far, it appears that his second tenure will be as permissive as his first.

The Central Bank (CB) is about to perform its third debt swap to inject some life and liquidity into Russia's paralyzed banking system. And as Dmitrii Vasiliev, who recently resigned from the head of the Federal Securities Commission, suggested, the bank has done little to sort out viable banks from those that are hopelessly insolvent. To paraphrase former U.S. presidential candidate Ross Perot, the world may be hearing a giant sucking sound from Moscow as Russia's scarce financial resources are diverted to prop up too many unsound banks.

Soon after the bank's second swap on 25 September, CB First Deputy Chairman Andrei Kozlov declared the CB's effort a success. And although ITAR-TASS reported the same day that the Dalrybank in Russia's Far East had resumed handling individual clients' deposits, it may be too soon for congratulations. There is still insufficient evidence that the CB's operations have had or will have the desired effect on the banking sector by making the nation's payment system functional once more.

Western analysts have suggested that at the very least, the CB's effort has already been far too costly: Kozlov said that the second debt swap alone required the addition of 960 million rubles to the nation's money supply. Too much money is being thrown at too many banks considering that a drastic weeding out of their ranks--they numbered more than 1,500 as of 1 September-- is in order.

Moreover, the CB's solution seems expensive given that Russian industry and consumers are less reliant on the domestic banking industry than their counterparts in most developed industrial nations. For example, in 1997, according to Juliet Johnson, visiting assistant professor at Dartmouth College, New Hampshire, fewer than 10 percent of all Russian banks' loans to enterprises were long-term. Nevertheless, the banking system was worth preserving if only because it functioned as the nation's payment system and provided some working capital. When it stopped working, so did the economy.

When Viktor Gerashchenko was appointed CB chairman on 11 September, economists on either side of the Atlantic questioned whether he was the right choice. Certainly, the enthusiastic support his candidacy received in early September from Russian commercial bankers inspired skepticism that Gerashchenko would be the tough taskmaster needed. Even more damning was Gerashchenko's record overseeing commercial banks.

It was, after all, under Gerashchenko's rule that the number of commercial banks mushroomed. In the early 1990s, it was easier to get a license from the Central Bank to form a commercial bank than it was to open a kiosk on one of Moscow's long avenues. Such niceties as more than minimal reserve requirements were not introduced until after Tatyana Paramonova took over as acting director of the bank in 1994.

Gerashchenko has a history not only of loose supervision of commercial banks but also of wiping away debts with inflationary emissions. In the first few months of his tenure at the bank in 1992, monetary emissions amounted to 20 -30 percent of GDP, according to Gary Peach in the "Moscow Times of 22 September. Economists linked this increase in the money supply to the hyperinflation that followed and the ruble's crash on Black Tuesday, 11 October 1994, when it lost more than 25 percent of its value.

Some Western analysts and bankers, according to Peach, believe that it is both unfair and misleading to judge Gerashchenko on his past record. They report that he learned later in his professional life to appreciate the benefits of a tight monetary policy. And although the CB's increase of the money supply in September 1998 bears an eerie resemblance to that which occurred in 1991, it is always possible that Gerashchenko will follow up these emissions by placing the ruble printing presses in cold storage. It is also possible that the CB will use its new unprecedented powers, which were granted under a draft law on bankruptcy that has already sailed through three readings in the State Duma, to force a number of banks into bankruptcy.

A final answer to the questions of whether Gerashchenko has seen the light and rescued the Russian banking system requires more time. But one thing to monitor is whether some banks actually are closed. Another is the rate of inflation, which has measured 64 percent since August. Should it spiral as it did between 1992 and 1994, when a significant chunk of the Russian population's savings was wiped out, then it might be fair to say that cost of resurrecting the nation's payment system -- no matter how efficiently it may begin to operate -- was simply too high.