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Newsline - November 4, 1998


Minister for Emergencies Sergei Shoigu arrived in Kamchatka on 4 November to seek a solution to the region's energy problem. Deputies of the local legislature have already appealed to the UN for 120,000 tons of fuel oil and 30,000 tons of diesel fuel. Temperatures have sunk to -15 to -18 degrees Celsius. Empty pipes are starting to burst and residents are living in dark homes with only gas hot plates to cook on, "Vremya MN" reported on 3 November. Nearby Magadan Oblast is also in the grip of a similar crisis, "Izvestiya" reported. Magadan Governor Valentin Tsvetkov has sent an appeal to Prime Minister Yevgenii Primakov, warning that a "social explosion" is imminent. The governor wants funds to purchase emergency supplies of fuel and food. JAC


Amid growing criticism of its economic program, Primakov's government managed to attract at least one supporter: Communist Party leader Gennadii Zyuganov, who on 3 November called the plan "reassuring" because it supports domestic producers and requires the timely payment of wages. Zyuganov also noted that the program has not yet been fully elaborated and that "practical programs need to be drafted for each of the anti-crisis measures." Meanwhile, Russian newspapers carried a confidential memorandum from the IMF critiquing the authors of the program for failing to reduce government expenditures and for suggesting a reduction in taxes at the same time. The program does not suggest any cuts in the number of people employed by the state or the elimination of non- priority programs, while it "presupposes an increase in state spending for industry, public works programs, and social benefits." JAC


Deputy Prime Minister Gennadii Kulik brushed aside the fund's criticisms, saying that "whatever measures encourage the country's economic growth are not to the IMF's liking." He said that the government will stand by every commitment made and was prepared for the worst-case scenario, if the $4.9 billion IMF tranche that had been scheduled to be disbursed in September is not forthcoming. He noted that with the expiration of the government's 90-day moratorium on debt payments in mid-November, Russia will have to pay $2.1 billion of its national debt and debt owed by its commercial banks. If no credits are forthcoming, he warned, "Russian exporters may be ruined and assets abroad could be seized." JAC


In anticipation of the mid- November deadline, a delegation from the Finance Ministry and 17 international banks met in London on 4 November for a new round of talks on restructuring Russian debt. Talks are likely to be heated in part because a Central Bank official told "Kommersant- Daily" that the government is still refusing to consider one of the creditors' main demands, namely that part of their debts be paid in cash. On 2 November, Central Bank Chairman Viktor Gerashchenko pledged that the 90-day moratorium on debt repayment will not be extended. JAC


The EBRD will not provide loans for restructuring the Russian commercial banking system, Interfax reported on 4 November, quoting a Moscow-based EBRD official. The Central Bank had been negotiating with the EBRD to redirect money from old EBRD loans to the banking sector. Meanwhile, IMF criticized the government's banking plan in a confidential memo (see above), suggesting that the Central Bank's plan to recapitalize commercial banks threatens its own solvency. The fund also said that the number of banking institutions the Central Bank hopes to save is unrealistically high. The "Moscow Times" reported that the Central Bank issued 55 billion rubles ($3.5 billion) in loans to a small group of banks, including Most Bank and SBS-Agro, on 31 October. The loans allowed some individual depositors to withdraw small amounts of money from their accounts. JAC


South African company De Beers and Russia's ALROSA signed a new three-year trade agreement on 3 November. According to Interfax, the current agreement differs little from its predecessor, which required ALROSA to sell De Beers annually diamonds worth at least $550 million. Citing an anonymous source at Gokhran, Interfax reported that De Beers Chairman Nicholas Oppenheimer would discuss with Prime Minister Primakov a loan to the Russian government using diamonds as collateral. Eight years ago, De Beers granted the Soviet government $1 billion in exchange for the right to develop Russian diamond resources. However, on 3 November, Oppenheimer told reporters that no discussion of such a loan had taken place. "Kommersant-Daily" reported the next day that while the government wanted such a credit, De Beers was uninterested, because unlike eight years ago, the world price for diamonds is falling rather than rising. JAC


First Deputy Prime Minister Yurii Maslyukov introduced Gennadii Khodyrev to the staff of the Ministry for Anti-trust Policies and Support for Entrepreneurship as their new minister on 4 November. Khodyrev is a former Duma deputy and a member of the Communist Party faction. JAC


Delegates to the Parliamentary Assembly of the Union of Belarus and Russia have approved a draft document outlining the organization's border policy, which envisions a visa valid for the entire territory of the union. According to ITAR-TASS on 3 November, Russia will provide more than 20 million rubles ($1.3 million) and Belarus 9 million rubles to the Union's 1999 budget. Russian State Duma Speaker Gennadii Seleznev, who is attending the assembly in Yaroslavl, told reporters that he favors a national referendum in Russia on the question of a union of Russia, Belarus, and Ukraine. Seleznev said he does not rule out the idea of Yugoslavia joining the union at some point in the future and added that he thinks Bulgaria will also likely want to join. Europe long ago started to integrate, he said, and "we should also think about integration." JAC


Russia is seeking a speedier implementation of UN Security Council resolution 1192 and an eventual lifting of sanctions against Libya. The resolution called for Libyan suspects in the bombing of a Pan Am plane near Lockerbie, Scotland, to be tried in the "neutral" country of The Netherlands. Russian Foreign Ministry spokesman Vladimir Rakhmanin told reporters on 3 November that a majority of members of the Security Council want the "Libyan problem" solved quickly and that all countries concerned should work to ensure a start date for the trial. JAC


The legislature of Krasnoyarsk Krai has passed the first law in Russia enabling local citizens to recall their elected governor, "Vremya MN" reported on 3 November. Krasnoyarsk Governor Aleksandr Lebed had promised that he would create a mechanism for citizens to get rid of their governor should he or she not perform adequately. Lebed has not yet signed the bill, but presidential representative to Krasnoyarsk Valerii Kazakov said that Lebed plans to appeal the law because it gives the local legislature an unfair advantage over the office of governor. JAC


In an interview with Ekho Moskvy on 3 November, CIS Executive Secretary Boris Berezovskii denied charges made by the presidents of Chechnya and Ingushetia in an interview with "Komsomolskaya pravda." According to those charges, Berezovskii had "driven up" the ransom currently being demanded for hostages abducted in Chechnya by offering material incentives to secure their release. Berezovskii stressed he had secured the release of 55 Russian hostages without having paid a single kopeck. Also on 3 November, Russian Interior Minister Sergei Stepashin told journalists that his ministry recently had an opportunity to secure the release of kidnapped presidential envoy Valentin Vlasov but that unnamed forces paid a large sum of money to thwart that operation. Vlasov's abductors are demanding $7 million for his release. LF


Maverick field commander Salman Raduev told Interfax on 3 November that an estimated 50,000 Chechens who collaborated with the occupying Russian forces in 1994-1996 should be deprived of their civil rights. Raduev again called for the resignation of Chechen President Aslan Maskhadov, whom he claimed is now supported only by those who had backed the puppet government of Doku Zavgaev. A meeting scheduled for 3 November between Maskhadov and the three field commanders (Raduev, Shamil Basaev and Khunkar-Pasha Israpilov) who for the past two months have been lobbying for his resignation failed to take place. LF


Maskhadov has named field commander Abubakar Montaev as head of the Chechen army, Russian agencies reported on 3 November. Montaev, who replaces Alkhazur Abuev, is a veteran of the 1994- 1996 war. Earlier, he had fought with Chechen volunteers in Abkhazia and Nagorno-Karabakh. LF


Up to 10 Tajik government troops have been killed in fighting with armed rebels loyal to Colonel Makhmud Khudoiberdiyev in two towns in northern Tajikistan. The rebels attacked government troops early on 4 November in a fight for control of the airport at Chkalovsk. They also seized key administrative buildings in Khudjand, several kilometers away. President Imomali Rakhmonov has convened a meeting of his Security Council to discuss the situation, which presidential spokesman Zafar Saidov characterized as "very serious." Khudoiberdiyev has launched similar attacks in the past. In a telephone interview with Reuters on 4 November, he deplored criminality and the absence of democracy and freedom of speech in Tajikistan. LF


The president of the U.S.-Kazakh company Chevron-Munaigas, Phil Meek, told journalists in Almaty on 3 November that the Kazakh government has endorsed the feasibility study for the Caspian Pipeline Consortium (CPC) project, in which Chevron has a 15 percent stake, RFE/RL's Almaty bureau reported. The project envisages the construction of a 1,500 km oil pipeline from eastern Kazakhstan to the Russian Black Sea port of Novorossiisk. On completion of the project in 2001, initial through-put capacity will be 28 million metric tons per year (560,000 bpd), according to Reuters. Meek also dismissed Turkish concerns over the possible ecological hazards inherent in increasing the amount of crude transported by tanker through the Turkish straits, saying that the CPC "is the most economically sound and safe pipeline." LF


Iran will hold an international conference on security and the transportation of Caspian oil and gas in Tehran on 7-8 November, Turan reported on 3 November. Iranian experts argue that their country is economically the most viable export route for Caspian oil and gas and that a total investment of $350 million is sufficient to create the infrastructure for the transport via Iranian territory of all oil and gas extracted in the Caspian basin. That infrastructure will include a new pipeline from Nika, located on the Caspian, to Tehran. Meanwhile Iran wants to expand the program of oil swaps whereby it takes delivery of Caspian crude for domestic refining and provides an equivalent volume of oil for export from the Persian Gulf. Kazakhstan has exported a limited quantity of crude in this way. LF


Visiting Israel last week, Armenian Foreign Minister Vartan Oskanian said that Yerevan is prepared to act as mediator between Israel and Iran, according to "Haaretz" on 2 November, as summarized by the BBC. Oskanian said that during his two visits to Tehran in August- September, he received the impression that President Mohammad Khatami is not averse to such mediation. Oskanian met with Prime Minister Benjamin Netanyahu, Knesset speaker Dan Tikhon, and Industry and Trade Minister Nathan Sharansky, whom he assured of Armenia's desire to revive bilateral economic relations. On 31 October, Oskanian met with Palestinian leader Yasser Arafat, with whom he discussed the Arab-Israeli and Karabakh conflicts, Armenpress reported on 2 November. LF


Speaking at a press conference in Yerevan on 3 November, Armenian presidential press secretary Vahe Gabrielian denied Turkish media reports that Kurdistan Workers' Party (PKK) chairman Abdullah Ocalan is in Armenia, ITAR-TASS and Noyan Tapan reported. Gabrielian said that Ocalan had never visited Armenia and that the Armenian leadership has no intention of inviting him to do so. The Turkish daily "Hurriyet" claimed last week that Ocalan was temporarily staying at the Russian military base in Armenia. Russian Foreign Ministry officials have denied that he is in Russia (see "RFE/RL Newsline," 27 and 30 October 1998). LF


The Russian State Duma voted unanimously on 4 November to appeal to President Yeltsin to grant Ocalan political asylum in Russia, Reuters reported. The Duma also released a written statement signed by Ocalan in which the PKK chairman formally requests asylum in Russia. LF


Military Prosecutor Badri Bitsadze told Georgian state television on 3 November that Lieutenant Akaki Eliava, who led the insurgency at a Georgian military base last month, may be pardoned if he voluntarily surrenders to the Georgian authorities, AP reported. Prosecutor- General Djamlet Babilashvili told journalists the same day that media reports that the Georgian government has issued orders to hunt down and kill Eliava are untrue, according to Interfax. Also on 3 November, National Security Minister Vakhtang Kutateladze said at a news conference that Eliava could not have authored the ultimatum issued in his name the previous day calling for the resignation of President Eduard Shevardnadze "because he is not very intelligent." The forged ultimatum, Kutateladze reasoned, is additional proof that the Eliava mutiny was organized by "destructive forces" both within Georgia and abroad. LF


The Russian Foreign Ministry issued a statement on 3 November condemning the death of a member of the CIS peacekeeping force in Abkhazia the previous day, ITAR-TASS reported. Four other servicemen were injured when their armored personnel carrier hit a mine in Abkhazia's Gali Raion. Nikolai Rusak, a spokesman for the exclusively Russian peacekeeping contingent, told journalists in Sukhumi on 3 November that 32 terrorist acts have been perpetrated in Abkhazia since the signing of a cease-fire protocol on 25 May 1998. Russian peacekeepers were the target of 17 of those attacks. More than 60 Russian peacekeepers have been killed since the force was first deployed along the Georgian- Abkhaz border in summer 1994. LF


John Odling-Smee, the IMF's top negotiator in talks with Ukraine, said in Kyiv on 3 November that Ukraine's 1999 draft budget is "overly optimistic" and urged the Ukrainian parliament to revise it, AP reported. The draft budget forecast a deficit of 0.6 percent of GDP, revenues of 22.5 billion hryvni ($6.6 billion), expenditures of 23.18 billion hryvni, and a 1 percent growth in GDP. Odling- Smee said that both revenues and expenditures should be downgraded. He added that further IMF credits to Ukraine imply a decrease of budget expenditures, the abolishment of state non- budget funds, and the "optimization of taxation," dpa reported on 3 November. JM


President Leonid Kuchma's aide Valeriy Litvytskyy said the government is seeking to attract credits by putting the 1999 budget deficit at 680 million hryvni and by "lowering state consumption as much as possible," Interfax reported on 3 November. Litvytskyy added that Ukraine want to discuss with the IMF a possible money emission. He said that a possible emission could be via commercial banks and that its inflationary consequences would be "minimal." Litvytskyy also stressed that the current limitations on the purchase of hard currency in Ukraine--which is in violation of Ukraine's commitments to the IMF--"will not last longer than a month." JM


Litvytskyy told Interfax on 3 November that inflation last month amounted to 6.3 percent, compared with 3.8 percent in September. He added that the government expects inflation to slow down in November owing to the currency stabilization program adopted in October. Inflation in the first 10 months of 1998 totaled 12.8 percent, esceeding the government target of 12 percent for the whole year. "This is not the worst price we could have paid for the financial crisis in the region," Litvytskyy commented. JM


A World Bank delegation, meeting with Belarusian government officials in Minsk on 2-3 November, concluded that no aid will be provided to Belarus until it launches economic reforms. World Bank Vice President Johannes Linn criticized Minsk for pursuing a "distorted" exchange-rate policy (Belarus uses four different exchange rates for ruble-dollar conversions). "New loans [to Belarus] cannot be made in the foreseeable future, and definitely not until crucial reforms have been implemented," AP quoted Linn as saying. He added that apart from reforming the currency exchange mechanism, Belarus also needs to limit money-printing, stop subsidizing outdated and unprofitable factories, speed up privatization, and liberalize the economy in general to attract investors. JM


According to official data released last month, industrial production fell by 4.5 percent in September, compared with August, while the inflation rose to 17.6 percent from 3.8 percent in August. At the same time, the Statistics Ministry reported that GDP in the first nine months of this year grew by 10 percent. This week, the Belarusian ruble slid from 250,000 to 300,000 to $1 on the interbank exchange market (the official exchange rate is 58,600 to $1). "The Belarusian miracle has ended, having demonstrated that in economics there are no miracles," Reuters on 3 November quoted a Belarusian National Bank analyst as saying. The analyst added that exports to Russia in September were 55 percent of last year's level. JM


Belapan on 3 November reported that an initiative group set up to organize a referendum on the creation of a Belarusian-Russian confederation has handed over a list of its 1,177 members to the Central Electoral Commission. Syarhey Haydukevich, chairman of the Belarusian Liberal Democratic Party (BLDP) and the group's leader, told Belapan that the confederation idea does not contradict the Belarusian-Russian Union charter and would not mean the loss of Belarusian sovereignty. Under the Belarusian Constitution, a referendum may be launched by the president, the National Assembly, or an initiative group if 450,000 signatures are collected. Mikalay Statkevich of the opposition Social Democratic Party commented that the BLDP's referendum initiative is "another attempt by this scandalous organization to attract attention to itself." JM


The daily "Eesti Paevaleht" on 3 November quotes Prime Minister Mart Siimann as saying the cabinet does not rule out that draft legislation crucial for the 1999 budget will be tied to a vote of confidence, BNS reported. The government has proposed hiking excises on tobacco, alcohol, and motor vehicles to add 900 million kroons (some $69 million) to next year's budget, but the parliament recently rejected the bills in the first reading. Siimann commented that a confidence vote would be an "emergency measure" only but that the possibility cannot be excluded at this stage. With regard to speculation that the parliament will again reject the 1999 budget, Siimann said that he has no reason to take such a "bleak view." Last week, the government returned the draft unchanged to the legislature after lawmakers had rejected it without debate (see "RFE/RL Newsline," 30 October 1998). JC


President Guntis Ulmanis has named outgoing Transport Minister Vilis Kristopans as prime minister-designate. Kristopans said he will begin discussions with the Fatherland and Freedom party and the New Party, with which his Latvia's Way has set up a minority alliance (see "RFE/RL Newsline," 2 November 1998). The agreement foresees cooperation with either Andris Skele's People's Party, which won the 3 October elections, or the Social Democrats. Kristopans said it will take at least two weeks to form a new government. JC


Russian Foreign Ministry spokesman Vladimir Rakhmanin on 3 November denounced the education law passed by the outgoing parliament during its final session last week (see "RFE/RL Newsline," 30 October 1998), BNS and Reuters reported. Rakhmanin noted that the law "completely excludes" the Russian language from the state educational system, which, he said, is inconsistent with international norms. He also criticized the Latvian law on radio and television, which reduces the amount of Russian-language programming, and a declaration on World War II legionnaires as "irresponsible decisions." With regard to the declaration, which states that Latvian soldiers were conscripted into the Waffen SS forcibly and fought only against the Soviet occupiers, Rakhmanin told BNS that "statements trying to justify SS actions cannot be supported by any arguments." JC


The cabinet has submitted to the parliament a bill cutting compulsory military service from 15 to 12 months, "Rzeczpospolita" reported on 4 November. If approved by the parliament and signed by the president, the bill will take effect on 1 January 1999. The bill allows full-time university students to defer service, but part- time students will have to prove they are studying. Deputy Defense Minister Romuald Szeremietiew said the army needs some 140,000 recruits. He added that the Defense Ministry will seek to cut compulsory service even further and increase the number of professional military personnel, which currently stands at 90,000. Under a reform urged by NATO, Poland is reducing its troop strength from 240,000 to 160,000-180,000. JM


Foreign Ministry spokesman Mahmud Mohammadi said on Iranian state television on 3 November that Teheran has recalled its ambassador to Prague to protest RFE/RL broadcasts to his country. Mohammadi added that Iran will reduce economic cooperation with the Czech Republic and "will no longer trade with, or grant industrial projects to, Czech companies." The Czech Foreign Ministry said that Prague believes Iran's decision is "of a mere temporary nature" and that it will take no "reciprocal measures." A spokesman for President Vaclav Havel called the Iranian action "unwarranted," saying the Czech Republic is not responsible for RFE/RL broadcasts. Interior Minister Vaclav Grulich said he will propose that the government discuss the reactions to the broadcasts at its weekly meeting on 4 November, CTK reported. MS


Presidential adviser Jiri Pehe on 3 November said Vaclav Havel believes former Vienna Mayor Helmut Zilk, whose alleged links with the communist secret services prompted the president withdraw an award to Zilk (see "RFE/RL Newsline," 26 October 1998), "deserves to know what the findings [about Zilk's case] are." Pehe said Havel will invite Zilk to Prague and will "personally meet with him" to discuss the allegations, Reuters reported. Pehe said no date for the meeting has been set so far, but he added that he believes Zilk is "inclined to come here." Presidential spokesman Ladislav Spacek said Austrian President Tomas Klestil phoned Havel on 29 October to ask about the case. MS


The new government on 3 November appointed Vladimir Mitro as chief of the counterintelligence service (SIS), CTK reported. Mitro replaces Rudolf Ziak, who was SIS chief for just a few days, after the previous government dismissed Ivan Lexa (see "RFE/RL Newsline," 29 and 30 October 1998). Mitro headed the SIS under former Prime Minister Vladimir Meciar but was dismissed at his own request in 1995 over fabricated accusations that agents were shadowing Meciar and parliamentary chairman Ivan Gasparovic. After his dismissal, Mitro revealed that Meciar had asked the SIS to draw up lists of journalists allegedly paid from abroad. He also confirmed that Meciar's Movement for a Democratic Slovakia attempted to create parallel intelligence structures when it was in opposition for several months in 1994. MS


The government on 3 November pledged to work with the country's Romani minority to improve living conditions, TASR reported. In a statement, the cabinet said it wishes to "create an environment and conditions where all citizens will feel safe and will have no reason to leave their country." The U.K. recently imposed visa requirements on Slovak citizens following a surge of mostly Romani asylum seekers from Slovakia. MS


Hungarian Democratic Forum spokesman Karoly Herenyi told "Magyar Hirlap" on 3 November that the party rules out cooperating with just the Socialists, the Free Democrats, and the Workers' Party, and is prepared to hold talks with other groups, including the extreme right Hungarian Justice and Life Party (MIEP). The four candidates running for the party's presidency on 19 December are incumbent Chairman Sandor Lezsak, former Prime Minister Peter Boross, incumbent Justice Minister Ibolya David, and former Justice Minister Istvan Balsai. According to the Budapest daily, the party's options are to proceed toward a union with the major coalition partner, the Federation of Young Democrats-Hungarian Civic Party, to approach the MIEP, or to pursue its own policies. MSZ


The Electoral Commission on 3 November released the final returns of the second stage of the parliamentary elections, which took place two days earlier. The coalition of the Internal Macedonian Revolutionary Organization (VMRO-DPMNE) and the Democratic Alternative (DA) came first with 58 out of 120 seats. The Social Democrats, who led the outgoing government, took 29 seats. The two main ethnic Albanian parties, which fielded joint candidates to ensure that Albanians were elected in mainly Albanian areas, have 24 seats. The Liberal Democrats won four, the Socialists two, and the Alliance of Roma one. The election will be repeated in two districts in which irregularities took place. PM


The constitution states that President Kiro Gligorov must soon ask a leader of the party that won the most votes to form a new government. It is unclear who that person will be, dpa reported from Skopje on 3 November. VMRO leader Ljubco Georgievski said during the campaign that he would be the prime minister in a VMRO-DA government and that this is specified in the coalition agreement. But a DA spokesman said on 3 November that "agreements can be changed" and suggested that DA leader Vasil Tupurkovski might become the next prime minister. Many observers said during the campaign that the purpose behind the formation of the coalition was to secure the support of the multi-ethnic DA for the Macedonian nationalist VMRO in the parliamentary election and the backing of the large VMRO electorate for Tupurkovski in the 1999 presidential vote. PM


Adem Demaci, who is the political spokesman of the Kosova Liberation Army (UCK), said in a statement in Prishtina on 3 November that the UCK is not going to transform itself into a police force. Albanian state television had reported on 31 October that UCK fighters will become local police officers in keeping with the agreement between Yugoslav President Slobodan Milosevic and U.S. special envoy Richard Holbrooke. Demaci stressed that the UCK is "protecting the sovereignty and integrity of the Republic of Kosova," adding that any attempt to abolish the goal of independence will fail. The same day, Demaci told AP that no political settlement is possible without the UCK's consent. He added that it is "unacceptable" that 15,000 federal Yugoslav soldiers and 10,000 Serbian police remain in Kosova," arguing that displaced persons are afraid to return home as long as that number is not cut to 8,500. FS


The Pentagon said in a statement on 3 November that six B-52 bombers will soon leave the U.K. for their home base in Louisiana. The text added that the aircraft can still reach targets in Serbia from Louisiana if ordered to do so. The bombers, which carry cruise missiles, arrived in the U.K. in October as part of NATO's campaign to warn Milosevic that he faces air strikes if he does not comply with UN Security Council Resolution 1199 on Kosova. Ethnic Albanian observers in Prishtina suggested that Milosevic will regard the withdrawal of the aircraft as a sign that NATO's resolve has weakened or that the alliance's attention has been diverted to the increasingly tense relations between the UN and Iraq. PM


Shadow-state President Ibrahim Rugova and U.S. Ambassador to Macedonia Chris Hill visited several localities in rural Kosova on 3 November. Rugova said that he saw "lots of destruction of property and houses...[but also] the beginning of the return of people to their homes. Of course we have to give them a deeper sense of security because there is still some fear," he continued. Rugova has not visited rural areas of the province since 1989 because he feared that the Serbian authorities might detain him, Reuters reported. It is unclear why he feared police would detain him in the countryside but not in Prishtina or Belgrade, where he spends most of his time. In related news, Euronews television showed footage of rural Kosova on 4 November that indicated that the Serbian security forces had burned out the interiors of many homes, leaving empty shells without roofs. PM


A spokeswoman for the international community's Carlos Westendorp said in Sarajevo on 3 November that Westendorp has completed a test study of corruption, which he conducted in Muslim-held Bugojno. The study revealed massive fraud in dealings involving the reconstruction, allocation, and privatization of state-owned real estate. The investigation found that Muslim religious leaders, politicians, military officers, and police, as well as private citizens, illegally bought or sold property belonging to the state or to Serbian or Croatian refugees, AP reported. It is unclear when the alleged illegal dealings took place. PM


A spokesman for the Pentagon said in Washington on 3 November that two members of a U.S. Army helicopter crew received minor eye injuries from a laser during a flight in the Zenica area on 24 October. A subsequent search of the area revealed only one small laser, which was of a type used in schools to project images on walls. The laser that injured the helicopter crew must have been larger than the school "toy," the spokesman added. He noted that the incident was "totally unexpected" and took place in a residential area. It is unclear why the Pentagon waited more than one week to report the incident. PM


OSCE Ambassador to Albania Daan Everts told Reuters in Tirana on 3 November that the OSCE's Office for Democratic Institutions and Human Rights will send 150 observers for the 22 November referendum on a new constitution. Norway's Kare Vollan will head the mission. Other monitors will come from the staffs of embassies in Tirana, from international organizations present in Albania, and from the Council of Europe's and the OSCE's parliamentary assemblies. FS


Prime Minister Pandeli Majko and Prosecutor-General Arben Rakipi agreed in Tirana on 3 November to create a special office to fight organized crime, ATSH reported. The same day, the Bank Auditing Council sent to the parliament a draft law aimed at stopping money laundering. In other news, the Supreme Court turned down an appeal to release former Interior Minister Halit Shamata, former Defense Minister Safet Zhulali, former Deputy Secret Police (SHIK) Chief Bujar Rama, and former Vlora police chief Sokol Mulosmani. The four have been under house arrest since August pending trial on charges of committing "crimes against humanity" during unrest in 1997. Also on 3 November, "Zeri i Popullit" quoted unspecified SHIK sources as saying they have evidence that Democratic Party supporters have a military training camp near Shkodra. The Democrats strongly denied the reports, according to dpa. FS


On the second day of his visit to France, Radu Vasile on 3 November met with Lionel Jospin, with whom he discussed bilateral relations, French investments in Romania, and international issues. Jospin told Vasile that France is ready to help Romania "overcome its present particularly difficult economic situation" but that "political stability" is one of the main conditions for that effort to succeed. Vasile announced that the French Renault company is interested in acquiring a 51 percent stake in the Dacia automaker in Pitesti by the end of this year. MS


George Padure, an independent candidate who came third (with 20 percent of the vote) in the 1 November repeat of the Bucharest mayoral elections, has announced that he is supporting the opposition candidate Sorin Oprescu in the run off, scheduled for 8 November. Padure called on his supporters to vote for the Party of Social Democracy in Romania candidate. Turnout must be at least 50 percent plus one for the ballot to be valid. MS


Prime Minister Ivan Kostov has sent a letter to the leaders of the winning coalition in the Macedonian elections saying their electoral victory "will further confirm our joint European values...and help us build a common future in the EU," Bulgarian radio reported on 3 November. Kostov told the leaders of the Internal Macedonian Revolutionary Organization and the Democratic Alternative, Ljubco Georgievski and Vasil Tupurkovski, that their victory marks "the rejection of Tito's communism" and puts Macedonia "on the road of democratic change" as well as serving to "strengthen stability and security in our region." MS


by Jan Maksymiuk

Addressing Solidarity's 10th National Congress on 25 September, Polish Premier Jerzy Buzek boasted that his Solidarity-affiliated government has done more in one year than its left-wing predecessor did in four. To support that statement, Buzek noted that since its inauguration on 31 October 1997, his government has launched major reforms in administration, education, pension, health care, and taxation. The delegates responded by giving Buzek a standing ovation.

Poland's current cabinet, which is formed by the Solidarity Electoral Action (AWS) and the Freedom Union (UW), doubtless deserves much credit for its reformist efforts, particularly when compared with the cautious, rather conservative approach of the previous, left-wing government of the Democratic Left Alliance (SLD) and the Polish Peasant Party. However, Buzek's self- congratulatory assessment loses some of its luster if one takes a closer look at the systemic reforms currently under way.

Hailed as a radical step toward the decentralization of power, administrative reform nearly failed when it came to determining how many provinces the country should have. The government's initial idea of dividing the country into 10 or 11 economically self-sufficient regions was unable to overcome the barriers erected by local communities, the parliamentary opposition, the president, and even some coalition deputies who opted to defend local rather than party interests. In the end, 16 new provinces were created with few, if any, prospects of economic self-sufficiency.

The reform of the health care system has raised many doubts and apprehensions. The reform bill sets up so-called patient funds that are to be financed by employees' mandatory contributions equaling 7.5 percent of their gross income. Opponents of the bill argue that the contribution should be at least 11 percent in order to support the health care system adequately.

Tax reform, which Buzek also mentioned as one of his cabinet's achievements, serves, in fact, to highlight the political discord within the AWS-UW coalition and may be viewed as a frustrated attempt to carry out radical transformation in present-day Poland.

Originally, UW leader Leszek Balcerowicz, who is deputy premier and finance minister in Buzek's cabinet, proposed a reform of the tax system. Balcerowicz is known for his bold "shock therapy" in 1990, when he liberalized economic policies in Poland, introduced a free market, and put the country on the path of sustained economic growth. No less enthusiastically, Balcerowicz earlier this year prepared a white paper on tax reform--another form of "shock therapy" or a "tax revolution," as the plan was called in the media.

Balcerowicz proposed to abolish the current three-tier tax system and introduce a flat income tax rate of 22 percent in 2000. (Poland's current tax rates are 19, 30, and 40 percent, which correspond to annual incomes of below 25,252 zlotys ($7,425), between 25,252-50,504 zlotys, and more than 50,504 zlotys, respectively.) In 1999, the finance minister proposed to introduce two income tax rates of 22 percent and 32 percent and to abolish all tax exemptions. In order to soften the impact of the reform on the poorest segments of society (who would see their tax rate rise from 19 percent to 22 percent), Balcerowicz envisioned an increase in tax-free income. In addition, corporate tax was to be lowered from the current 36 percent to 22 percent in 2002.

Balcerowicz is convinced that taxes should be used primarily as a tool to stimulate the economy, not to curry favor with the electorate. High taxes on high incomes kill an individual's entrepreneurial spirit, he argues. Introducing a flat tax rate would boost economic growth, release the as yet untapped reserves of social energy, and create new jobs. Let people work and earn more money instead of looking for loopholes in tax legislation or evading tax payments is Balcerowicz's well-publicized credo.

Balcerowicz's proposal has provoked harsh criticism from both the left and the right of the political spectrum. The SLD called it "immoral," saying preference is given to the wealthiest while the state's fiscal grip on the middle and lower classes is tightened. The AWS, arguing that the tax system should be "family-friendly," is in favor of tax exemptions for families with a large number of children.

The cabinet, which is dominated by AWS politicians, finally rejected the tax reform proposed by its finance minister. Last month, it submitted to the parliament a tax reform bill providing only for the abolition of tax relief for private investors and those building their own homes and for the reduction of the corporate tax from 36 percent to 32 percent. More radical measures have been postponed until 2000.

Balcerowicz's failed second attempt at "shock therapy" may be interpreted as a sign that post-communist Poland is already beyond the stage where it is possible to launch "economic revolutions." Alternatively, it may be an indication that Polish politicians find it very difficult to answer some basic questions about their country's further development. For example, should the rich pay higher taxes than the poor? Or is economic growth more important than social equality? Balcerowicz's reform offered politicians a chance to provide clear answers to such questions. That chance now seems to have been missed.