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Newsline - May 19, 1999


The State Duma on 19 May confirmed acting Prime Minister Sergei Stepashin's candidacy for that post, with 298 votes in favor, 55 against, and 14 abstentions, RFE/RL's Moscow bureau reported. Our Home Is Russia, Russian Regions, and the Liberal Democratic Party factions solidly supported Stepashin's nomination, and the bulk of the Agrarian and People's Power faction also voted in his favor. Yabloko members continued their practice of voting independently: 24 cast their ballots in favor of Stepashin and 12 against. Before the vote, Yabloko leader Grigorii Yavlinskii announced that the group cannot give Stepashin its full support since he played a direct role in the war in Chechnya. In his remarks to the Duma, Stepashin emphasized the importance of forming a government of professionals, independent of party affiliation. JAC


The Central Bank on 18 May revoked the licenses of 12 failing banks, including Menatep, which before last August's devaluation of the ruble was the country's seventh largest in terms of assets. Other banks stripped of their licenses were Unikombank, Unibest, Derzhavnii, Interbiznesbank, Kontakt, MV, Slaviya, ELKOM- Bank, Krasnodarbank, Kurgansotsbank, and Nizhnevartovsk Commercial Innovation Bank, Interfax reported. The Central Bank explained the move by citing the banks' failure to meet its requirements, comply with federal laws, and make payments to creditors. Russian Television reported that Menatep's largest investors had already transferred their main assets to Menatep St. Petersburg. Two days earlier, then acting Prime Minister Stepashin had said that the licenses of six major Russian banks would be revoked in connection with the banks' participation in the illegal export of capital abroad. JAC


"Moskovskii komsomolets" reported on 19 May that many banks have been engaged in "stealing taxes" and that more than 20 billion rubles ($805 million) in tax money is stuck in "problem banks." Dmitrii Ignatiev, director of a department overseeing tax compliance among financial and credit organizations at the Tax Ministry, told the newspaper that the ministry might revoke the licenses of 30 banks for the systematic violation of tax laws. JAC


A Moscow court on 18 May declared Sidanko, Russia's sixth-largest oil company, bankrupt, ITAR-TASS reported. A 12-month external administrator will be appointed at the court's next hearing of the case, scheduled for 23 July, according to the agency. Spokesmen for Sidanko and BP Amoco, one of the world's largest oil companies, which controls a 20 percent share in Sidanko, both expressed shock at the court's decision, "The Moscow Times" reported on 19 May. Analysts said the court's decision was a blow for Sidanko's creditors and for Russia's hopes to attract foreign investment. According to Jim Henderson, oil analyst at MFK Renaissance, the court ruled against a plan that Sidanko's creditors supported, Reuters reported. He added that "the message is that buying an interest in a Russian oil company is not a good idea." JAC


Russian special envoy to Yugoslavia Viktor Chernomyrdin, U.S. Deputy Secretary of State Strobe Talbott, and Finnish President Martti Ahtisaari met in Helsinki on 19 May to resume negotiations on Kosova. Seven hours of discussions there the previous day produced no breakthrough. Talbott told Reuters that "these are very tough issues, but serious people are working on them." He did not give details but added that "there is enough purpose in continuing this effort to go on talking." Reuters noted that the three are trying to agree on enough details about the composition of and control over a possible international peace-keeping force to send Yugoslav President Slobodan Milosevic a joint message. They also hope to pave the way for a UN Security Council resolution on Kosova. Meanwhile in Bonn, high-ranking Foreign Ministry officials from the G-8 countries continued working on a draft UN resolution, the "Frankfurter Allgemeine Zeitung" reported. FS


An unnamed German government official told the "Frankfurter Allgemeine Zeitung" of 19 May that NATO forces and the Macedonian government failed to fulfill its obligations deriving from a 1994 OSCE agreement on notification and verification of military activities. According to that agreement, OSCE member states are obliged to report military activities involving more than 9,000 soldiers to all other members 42 days in advance. As a OSCE member state, Macedonia was obliged to report the deployment of NATO troops on its territory but failed to do so until after that number had been exceeded in late April. Russia requested an inspection in early May. The official also said that U.S. commanders failed either to brief the Russian verifiers or to provide a helicopter for verification from the air. He added that NATO Commander Wesley Clark argued that verification poses threats to the troops' security. The German official dismissed Clark's concerns, saying that NATO operations in Macedonia, unlike in Albania, are purely humanitarian in nature. FS


Russia's benchmark stock index, RTS, rose 7.7 percent on 18 May from the previous day, after serious slippage following Yevgenii Primakov's ouster as prime minister. Shares in Surgutneftegaz soared 17.3 percent, while Mosenergo and Rostelekom gained 6.5 percent and 5.3 percent respectively, AFP reported. The ruble, meanwhile, gained 4 kopeks against the dollar in morning trading on 19 May, rising to 24.75 rubles to $1, according to Interfax. On 17 May, the ruble rose 7 kopeks on the morning exchange. In both markets, traders attributed the rises to anticipation that Stepashin would be confirmed as premier. JAC


Real incomes rose in March by 4.7 percent compared with the previous month, while industrial production inched up 1.5 percent in April compared with last year, "Finansovaya Rossiya" and ITAR- TASS reported. However, real incomes in the first quarter slumped 28.3 percent, compared with same period last year. "Rossiiskaya gazeta" reported on 19 May that economists are divided over whether gains in output recorded in some industries are the first signs of a small economic recovery or are accidental. Acting Deputy Prime Minister Vladimir Bulgak took the optimistic view, telling the newspaper that the output growth of certain industries is occurring not just in monetary terms but in "physical terms" as well. On 18 May, the OECD concluded in a recent report that the situation of the economy "remains quite difficult and potentially unstable," but it added that the overall outlook is "perhaps a bit more encouraging than in late 1998." JAC


Russian President Boris Yeltsin showed up at the Kremlin on 19 May, according to the presidential press service. Yeltsin's appearance follows a spate of stories, sourced from the Spanish embassy in Moscow, that Yeltsin cancelled a meeting with Spanish Prime Minister Jose Maria Aznar because of a case of severe bronchitis (see "RFE/RL Newsline," 18 May 1999). JAC


Acting Deputy Prime Minister Bulgak told government officials on 18 May that some essential Russian computer networks may begin to experience failures as early as 9 September unless resolute measures are taken to prepare for the so-called millennium computer bug problem, "RIA- Novosti" reported. According to the agency, Bulgak accused the Economics Ministry of the worst performance among all government agencies in this regard. He pointed to the ministry's inadequate efforts to prepare industrial enterprises. Other agencies singled out for censure were the Federal Energy Commission and the State Committees for Cartography and Environmental Protection. JAC


The Federation Council on 18 May confirmed the appointment of Gennadii Zhilin as a judge at the Constitution Court, ITAR-TASS reported. Zhilin formerly served at the Russian Supreme Court. JAC


Interior Ministry officials on 18 May revealed that they have furnished Aleksandr Khinshtein, a journalist for "Moskovskii komsomolets," with an official police identification card, "The Moscow Times" reported on 19 May. Khinshtein is perhaps best known for articles that led to criminal investigations into business magnate Boris Berezovskii's alleged money-laundering at Aeroflot and into electronic eavesdropping on Boris Yeltsin and family. Khinshtein was charged with showing false documents to police on 17 May when he was stopped by police after going through a red light and revealed his card identifying him as a police major. "Kommersant-Daily" the next day cited an anonymous source at the Interior Ministry as accusing Khinshtein of violating journalistic ethics by combining his activities as a journalist and an agent. Khinshtein's newspaper, for its part, accused various unnamed ministry officials with conspiring against both the reporter and Prime Minister Stepashin, who is also acting interior minister. JAC


At a meeting with then acting Prime Minister Stepashin in Moscow on 18 May the two rival candidates for the post of president of the Republic of Karachaevo- Cherkessia agreed to refrain from organizing public demonstrations and calling for the revision of the region's borders, Interfax and Caucasus Press reported. A delegation from the Russian Central Electoral Commission will be sent to Karachaevo-Cherkessia to clarify allegations by defeated candidate Stanislav Derev that supporters of retired army General Vladimir Semenov rigged the outcome of the poll. According to preliminary results, Semenov polled 75-80 percent of the vote and Derev 20 percent. Also on 18 May, President Yeltsin appointed Deputy Interior Minister Ivan Golubev his acting plenipotentiary in the republic. LF


Speaking on NTV's "Man of the Day" program on 18 May, Eduard Shevardnadze predicted that Georgia will not join NATO while he is president, even if he is re-elected next year for a second five-year term, Caucasus Press reported. Shevardnadze admitted that Georgia is currently incapable of meeting membership requirements. Reuters on 18 May quoted a Georgian Defense Ministry spokesman as saying that for financial reasons, Defense Minister Davit Tevzadze has ordered the cancellation of the planned 26 May military parade to mark the 81st anniversary of Georgia's independence. The spokesman said the ministry is so short of funds it cannot even buy gasoline for its fleet of cars. LF


Zurab Zhvania has turned down a 17 May invitation by Adjar Supreme Council chairman Aslan Abashidze to take part in a televised debate, Caucasus Press reported on 19 May, citing "Dilis gazeti." A colleague of Abashidze's had accused Zhvania in 1997 of planning Abashidze's assassination, a charge that Zhvania denied (see "RFE/RL Newsline," 21 and 22 October 1997 ). At the same press conference on 17 May, Abashidze accused the central Georgian leadership of incompetence and called on its members to resign, according to "Rezonansi" on 18 May. He also criticized as undemocratic amendments to the existing election legislation drafted by Zhvania's Union of Citizens of Georgia. LF


Lev Mironov, who is the Russian Foreign Ministry's envoy for the Abkhaz conflict, told Caucasus Press on 18 May that as soon as the new Russian government has been formed, Moscow will advance a new initiative for kick-starting the deadlocked negotiations on a settlement of that conflict. Mironov accused both Tbilisi and Sukhumi of attaching greater importance to "upholding political prestige" than to seeking a compromise that would expedite the repatriation to Abkhazia of Georgian displaced persons. LF


State foreign policy adviser Vafa Guluzade said in Baku on 18 May that Azerbaijan has formally protested Armenia's acquisition of eight Chinese Typhoon multiple rocket systems, AFP and Turan reported. He added that he does not believe the explanation of the Chinese ambassador in Baku, who said that Armenia bought the weapons from an unnamed foreign company involved in trading with China without the involvement of the Chinese authorities. Guluzade said the sale was agreed on last October when Armenian Defense Minister Vazgen Sargsian and his Russian counterpart, Igor Sergeev, visited Beijing. He accused Beijing of aspiring to prevent the export of Caspian oil via Azerbaijan. (Kazakhstan has signed s preliminary agreement with China on building an export pipeline.) Arguing that the sale is a violation of international norms and agreements, Guluzade demanded that China ask Yerevan to return the weapons. LF


Kazakhstan's Intergaz company on 18 May cut gas supplies to northern Kyrgyzstan, RFE/RL's Bishkek bureau reported, quoting the deputy director-general of the Kyrgyzgas state company. Toktosun AbduvAliyev said his company owes Intergaz some $2.2 million for supplies received in 1997-1998. LF


The Kyrgyz government has agreed to IMF conditions for resumption of financing under a three-year Economic Structural Adjustment Facility (ESAF-2) program, Interfax reported on 18 May. Harry Trines, head of the IMF mission in Bishkek, said that over the next two years, Kyrgyzstan must implement tough monetary and financial policies, keep inflation below 20 percent in 1999, and increase budget revenues while cutting expenditures. The IMF initially allocated $88 million for the three-year program, of which the first $41 million was disbursed in 1998. It increased the total sum to $120 million last year. LF


Presidential spokesman Zafar Saidov told ITAR-TASS on 18 May that President Imomali Rakhmonov intends to expedite the drafting of amendments to the country's constitution that will pave the way for parliamentary elections early next year. Saidov added that presidential elections will take place by 6 November 1999, the day when Rakhmonov's term expires. LF


At the invitation of Iranian President Mohammad Kharrazi, Saparmurat Niyazov paid a one-day visit to the Iranian province of Golestan on 17 May to attend the ceremonial inauguration of the mausoleum of the 18th-century poet and philosopher Makhtum Kuli, RFE/RL's Turkmen Service reported. LF


Former Romanian Foreign Minister Adrian Severin, head of an OSCE mission visiting Belarus, said in Minsk on 18 May that the participation of "many citizens" in the opposition presidential elections "deserves the respect of democratically governed states." Severin added that Belarus needs a "meaningful dialogue" to achieve a "nationwide consensus on the legal provisions for free and fair parliamentary and presidential elections." According to Severin, the OSCE is planning to hold talks in Bucharest involving the Belarusian authorities and the opposition "to explore ways and means that could bring about such democratic elections," AP reported. JM


Some 35,000 Tatars rallied in Crimea's capital, Simferopol, on 18 May to mark the 55th anniversary of their deportation to Central Asia under Joseph Stalin's regime and to demand improved civil rights on the peninsula. "If the executive power does not do anything to resolve our problems, we will be forced to fully activate our national movement," Tatar leader Mustafa Dzhemilev told the crowd. The same day, Ukrainian President Leonid Kuchma created a presidential "Tatar advisory committee," which Dzhemilev said will include all members of the Mejlis, the Tatar assembly. After the rally Tatars set up a tent camp in front of the Crimean government building. Dzhemilev said some 250 people will remain in the camp until the government makes progress on meeting Tatar demands (see "RFE/RL Newsline," 18 May 1999). JM


The Central Electoral Commission on 18 May registered Leonid Kuchma and eight other challengers in the 31 October presidential elections. The other eight were Hennadiy Udovenko, Petro Symonenko, Oleksandr Moroz, Yuriy Kostenko, Vasyl Onopenko (leader of the Social Democratic Party [United]), Nataliya Vitrenko, Hennadiy Balashov (leader of the For a Beautiful Ukraine party), and Oleksandr Rzhavskiyy (leader of the United Family group). In order to become full-fledged presidential candidates, the challengers have to collect by 13 July no fewer than 1 million signatures supporting their candidacy. Moreover, those signatures must be gathered in at least two-thirds of Ukraine's oblasts. JM


Lennart Meri on 18 May rejected the resignation of army commander Lieutenant-General Johannes Kert in connection with the alleged attempted robbery by the acting head of the defense forces' Special Operations Group (see "RFE/RL Newsline," 18 May 1999), ETA reported. Meri said that the crime has seriously damaged the reputation of Estonia and its defense forces, but he added that "after long deliberation" he had decided not to accept Kert's resignation. He also met with Defense Minister Juri Luik to discuss improving procedures for checking the backgrounds of military personnel. According to BNS, Luik has formed a special commission to examine personnel policy in the defense forces and to make recommendations about the future role of the Special Operations Group. JC


In what is seen as foreshadowing the parliamentary vote on the negative supplementary budget, deputies on 18 May rejected an opposition proposal to delay the debate on the controversial spending cuts, an RFE/RL correspondent in Tallinn reported. The measure, proposed by the Center Party, was defeated by 54 to 42 votes, largely reflecting the balance of forces in the legislature between the ruling coalition and the opposition. The parliament is due to discuss the so-called austerity budget on 26 May. JC


The parliament on 18 May voted by 105 to one with 12 abstentions to confirm Mayor of Vilnius Rolandas Paksas as prime minister. Paksas, a member of the ruling Conservative Party, told deputies that he will continue the tight fiscal policy of his predecessor, Gediminas Vagnorius, noting that stable economic growth should be the cabinet's main task. Paksas has said that acting Finance Minister Algirdas Shemeta and acting Economy Minister Vincas Babilius will not be part of his new government, but observers say that most other posts are likely to be unchanged. Paksas now has 15 days in which to submit to the parliament his cabinet line-up and program. Meanwhile, outgoing German President Roman Herzog told his Lithuanian counterpart, Valdas Adamkus, in Vilnius on 18 May that Germany will fully support Lithuania's bid to join the EU. JC


Some 70 Kosova Albanians have left special refugee centers in Poland and illegally crossed the border with Germany, Polish Television reported on 18 May. According to that report, most Kosova refugees succeed in getting into Germany, where they have families or relatives. "[Kosova refugees] have the right to move freely around Poland and it is difficult to shut them in a guarded center as there is no [legal] basis for this," an Interior Ministry official commented. Polish Television noted that Germany and other Western countries have tougher regulations regarding refugees on their territory than Poland, where, it said, these regulations are "exceptionally liberal." JM


Czech government authorities appear ready to allow local companies to sell components and expertise to help Iran complete the Bushehr nuclear power plant, "Mlada fronta Dnes" reported on 19 May. A spokesman for the Czech Foreign Ministry said the sales, worth an estimated $200 million, would not involve items requiring a license. Deputy Prime Minister Egon Lansky indicated that the money is the government's top priority in the deal. Czech Prime Minister Milos Zeman said the cabinet has not yet discussed the deal. But he added that "Iran isn't the same thing as Iraq." The deal would reportedly involve steam turbines and cooling and ventilation systems from undisclosed Czech companies and nuclear know-how from Skoda Plzen. The U.S. has several times protested the Czech Republic's nuclear dealings with Iran, according to a report in "The Washington Times," cited by "Mlada fronta Dnes." VG


The parties of Prime Minister Milos Zeman and Chamber of Deputies Chairman Vaclav Klaus have agreed to alter the Czech Republic's proportional representation system, "Mlada fronta Dnes" reported on 19 May. The deal would involve increasing the number of electoral districts in the country. Such a system would make it more difficult for smaller parties to gain parliamentary representation. VG


In an interview with "Narodna Obroda" published on 18 May, Czech Chamber of Deputies Chairman Klaus appeared to indirectly support former Prime Minister Vladimir Meciar's candidacy in the Slovak presidential elections. Klaus told the newspaper that the new president of Slovakia should be someone who has the backing of a group of people who have similar political views. "I would vote for someone in that category. Vladimir Meciar, for example, definitely belongs in it," he added. He noted that a politician who is isolated would not be able to accomplish anything. VG


Slovak Deputy Prime Minister for European Integration Pavol Hamzik said the NATO bombing campaign in Yugoslavia is taking too long and has so far failed to achieve its intended goals, TASR reported on 18 May. Hamzik said politicians should take the initiative and the UN should play an appropriate role. In other news, the Slovak Defense Ministry announced it may seek a foreign loan to deal with financial difficulties this year, CTK reported on 18 May. VG


A poll conducted the day after voting in the first round of the Slovak presidential election found that 68 percent of respondents would vote for Kosice Mayor Rudolf Schuster in the second round, scheduled for 29 May, TASR reported on 19 May. Only 32 percent would vote for Vladimir Meciar, according to the poll, conducted by Polis Slovakia. In other news, some 3,000 civil engineers staged a protest in Bratislava on 18 May, demanding that the state pay its debts to civil engineering companies, TASR reported on 19 May. The government stopped paying those debts in September 1998. Thousands of civil engineers have been laid off in the last two years. VG


Two Yugoslav prisoners of war captured by the Kosova Liberation Army in mid-April and held by U.S. forces were handed over to Yugoslav authorities at the Roszke border station on 18 May. A U.S. military plane flew the two prisoners to Budapest airport from Germany. Nadya Kebir, a representative of the International Red Cross, denied reports that one of the prisoners asked for refugee status in Hungary. In other news, parliamentary speaker Janos Ader was elected executive deputy chairman of the Federation of Young Democrats- Hungarian Civic Party on 17 May, replacing Secret Services Minister Laszlo Kover. MSZ


George Robertson met with Hungarian Prime Minister Viktor Orban to discuss the NATO campaign in Yugoslavia, Reuters reported on 19 May. Robertson praised the commitment of Orban's government in the face of "fragile" public opinion. He stressed that NATO and EU membership bring benefits as well as responsibilities to those who join. Robertson also assured Orban that Hungary will be a recipient of financial aid in the post-conflict regional reconstruction effort. One survey found that the bombing and blockage of the River Danube could cost the Hungarians an estimated $500 million a year. VG


At least 3,000 people in Krusevac and a similar number in Aleksandrovac demonstrated on 17 May for the return of Yugoslav soldiers from Kosova, RFE/RL's South Slavic Service reported. Many of the protesters were relatives of soldiers and carried signs with slogans such as "We want our boys and not their coffins." The following day in London, British Defense Secretary George Robertson said that, "Yesterday there was a crack that appeared in the facade of the Yugoslav regime." In Krusevac, the Yugoslav army issued a statement saying that the protests there took place on 17 and 18 May. The statement charged that unnamed persons took advantage of soldiers' parents' feelings in order to promote "treason, undermine the defense of the country, and [promote] direct collaboration with the enemy." The statement added that the organizers will be prosecuted. Observers noted that the demonstrations were the first large ones against Belgrade's policies in Kosova to be reported since the NATO air strikes began in March. PM


Local political leader Milan Kandic told the informal "citizens' parliament" in Cacak on 18 May that the war in Kosova must end and that the "true democratization" of Serbia must begin, Montenegrin Television reported. Kandic called for an investigation into the role of a local army colonel in recently deploying an unspecified number of "tanks and [other pieces of] military equipment...near civilian buildings, and thus for causing, as Cacak Mayor Velimir Ilic said, the death of four and the wounding of 12 citizens of Cacak." The "citizens' parliament" issued a statement condemning NATO air strikes and calling on Belgrade to negotiate a quick end to the conflict. Anti-war protests also took place in Kraljevo and Novi Sad, RFE/RL's South Slavic Service reported. PM/PB


U.S. Ambassador David Scheffer, whose responsibility is to investigate possible war crimes, said in Brussels on 18 May that Serbian forces have killed at least 5,000 civilians in Kosova since March. He added that the number of men unaccounted for has reached 225,000, RFE/RL's South Slavic Service reported. They are among the approximately 550,000 people displaced within Kosova. NATO spokesman Jamie Shea added that the Atlantic alliance has evidence that Serbian forces have recently begun digging up mass graves in several places in Kosova and reburying the bodies in order to hide evidence of atrocities. Two days earlier, U.S. Secretary of Defense William Cohen said in Washington that the number of Kosovars killed by Serbian forces may be as high as 100,000. PM/FS


British Defense Secretary Robertson told reporters on a 19 May flight from London to Budapest that "we have a seen a unique savagery [in Kosova] and there is no indication [Yugoslav President Slobodan Milosevic] will stop there." The secretary added: "I don't think it is scare-mongering to say Vojvodina would be next in the drive for ethnic purity. It would not stop [at Kosova]. Montenegro would be next." He did not elaborate. PM


Kosovar leader Ibrahim Rugova told the Hamburg-based weekly "Die Woche" of 19 May that the international community must negotiate with Milosevic if it wants a settlement in Kosova. Rugova urged that Western countries not arm the Kosova Liberation Army (UCK), which, he said, should be disarmed when Serbian forces leave the province. PM


Unnamed officials from the provisional Kosova government, led by the UCK's Hashim Thaci, told British Prime Minister Tony Blair in Tirana on 18 May that the West should either arm the UCK or send NATO ground troops into Kosova, Reuters reported. They stressed that the UCK is doing "its utmost to ease the suffering" of Kosovar civilians," noting that the UCK has about 50,000 soldiers on the ground. They added: "We have more volunteers than we can arm." Blair told a crowd of thousands that NATO will continue its air attacks until it achieves its objectives, an RFE/RL correspondent reported from Tirana. The British leader stressed that NATO is defending "democratic values" and added that "Milosevic and his policy belong to the past--we belong to the future." Blair also visited NATO troops and a refugee camp in Elbasan. FS


British Foreign Secretary Robin Cook will use his visit to Washington on 20 May to urge top U.S. officials to join U.K. leaders in calling for deploying NATO ground troops to Kosova, the "Financial Times" reported on 19 May. In London, Cook told Parliament the previous day that the U.K. is "the only country facing up to the hard choices" on Kosova. He added that "we are not going to halt Milosevic from pursuing his violent repression by a dialogue in which we...point out to him the error of his ways. He will only abandon his plans if he knows that we are determined to maintain the military campaign and prevail." U.S. President Bill Clinton said in Washington that "we have not and will not take any option off the table" regarding possible military moves in the Kosova crisis. PM


In Bari on 18 May, German Chancellor Gerhard Schroeder and Italian Prime Minister Massimo D'Alema repeated their opposition to sending in ground troops. Schroeder called such a move "unthinkable." In Paris, Foreign Minister Hubert Vedrine and his Canadian counterpart, Lloyd Axworthy, "responded coolly" to the British position that ground troops might be needed in Kosova in the near future, "The Daily Telegraph" reported. In Belgrade, a Yugoslav Foreign Ministry spokesman said that his government is ready to "cut a deal" on Kosova, but he did not elaborate. PM


Hillary Rodham Clinton said in Washington on 18 May that the U.S. will provide another $15 million to the UN, Red Cross, and unspecified non-governmental organizations for humanitarian relief in the Kosova crisis. She added that part of the money will go to help the 20,000 Kosovar refugees expected to come to the U.S. She noted that an internet information center will be set up at Fort Dix, New Jersey, to help Kosovars find missing relatives. The total U.S. aid package for Kosova now exceeds $200 million, AP reported. PM


UN officials said in Geneva on 18 May that Serbian forces in Kosova are increasingly using ethnic Albanian civilians as human shields. The officials added that refugees who recently arrived in Macedonia told aid workers that Serbian troops forced them to flee to the mountains one day and then to come back down the next, the "Frankfurter Allgemeine Zeitung" reported. In Skopje, aid workers told Reuters that hunger has become a major factor prompting Kosovars to flee abroad. In Podgorica, male refugees recently released by the Yugoslav army said that Serbian troops humiliated and badly beat them during their brief captivity, AP noted (see "RFE/RL Newsline," l8 May 1999). PM


No refugees arrived in Albania via the Morina border crossing on 18 May, AP reported. An OSCE official in Kukes said that "based on what [some] refugees have told us, we think the Serbs are probably stopping" Kosovars from fleeing to Albania. Some refugees who arrived recently reported that "thousands" more were behind them. In recent days, NATO heavily bombed Serbian military positions along the valley of the White Drin River, which links Prizren with Kukes, but refugees said that the air strikes did not deter them from fleeing. FS


The Romanian National Unity Party (PUNR) has lodged a complaint with the Prosecutor- General's Office against five members of the Hungarian Democratic Union of Romania (UDMR) because of recent comments by the latter, Romanian Radio reported on 18 May. PUNR argues that the five UDMR members, including Laszlo Tokes, violated the Romanian Constitution by disparaging the country and making statements against the nation. At the UDMR congress on 15 May, Tokes said Kosova is a model of autonomy for Romania's ethnic Hungarians and called for the "end of the national Romanian state," AP reported. VG


Moldovan President Petru Lucinschi told visiting CIS Executive Secretary Yurii Yarov that he believes the Transdniester dispute can be resolved with the help of Ukraine and Russia. He said the Transdniester could be granted "broad autonomy." In other news, the Moldovan parliament approved an amendment to the law on social insurance that will allow the state to pay up to 50 percent of pensions and benefits it owes with Moldovan-made industrial goods and foodstuffs, Infotag reported on 18 May. Such payments may be offered in lieu of cash only if the recipient agrees. Moldova's pension arrears now total almost 300 million lei ($27 million). VG


The Bulgarian Socialist Party (BSP) has said the government should come up with a new policy program because the war in Yugoslavia has changed the situation in Bulgaria, BTA reported on 18 May. BSP spokesman Angel Naydenov also said government representatives are now touring the country to prepare the public for a possible ground operation in Yugoslavia. The previous day, the Bulgarian and Greek defense ministers called for a diplomatic solution to the Kosova conflict. VG


by Jan Cleave

Following last August's financial crisis in Russia, many observers feared the fallout would be particularly damaging to the Latvian banking sector. According to information released by the Bank of Latvia, Latvian commercial banks had invested 10.6 percent of their total assets in Russia (with 3.1 percent of all assets in short-term treasury bonds, or GKOs). By comparison, the exposure of Lithuanian banks to Russia was estimated at only 1.8 percent and that of the Estonian banking sector at less than 1 percent.

In the event, three out of a total of some 30 commercial banks in Latvia have gone bankrupt since last summer. The Latvijas Kapital and Viktorija banks, both conducting much of their business in Russia, folded in late 1998, while the Rigas Komercbanka--the country's third-largest commercial bank, with the European Bank for Reconstruction and Development as main share-holder--was declared insolvent in mid-March, having lost 29 million lats ($49 million) in Russia last year. Since then, a rehabilitation plan for the Rigas Komercbanka has been approved by the central bank.

Despite concerns that Latvian banks remain at risk, many in Riga are far more optimistic about the situation in the sector than they were at the end of last year. While Latvian commercial banks (including those declared bankrupt) posted total losses of some 120 million lats in 1998, the annual audit of those banks showed that only one that was still operating last month--the Latvijas Kredit Bank--did not have the required minimum capital of 2 million lats. Moreover, the banks' combined paid-in share capital rose from 154 million lats to 200 million lats. Those results, some analysts argue, indicate that the sector has withstood the Russian crisis.

Regardless of whether that assessment is correct (reserve requirements, however high, offer no protection against heavy investment losses), Latvian banks are now facing new challenges as a direct result both of the Russian crisis and of Latvia's desire for integration with the West. First, there is increased competition at home following the loss of the Russian market (as well as investing heavily in Russia, Latvian banks have also relied on Russian depositors). Commercial banks find themselves competing for a smaller pool of customers, while no longer able to offer low-price services covered by profits accumulated in neighboring Russia. To be successful under such conditions, banks must be able to improve services while keeping operating costs down.

Second, by the end of this year, all commercial banks operating in Latvia must have a minimum capital of 5 million ecus (some 3.5 million lats). That requirement, announced in 1995 by the Bank of Latvia, is aimed at meeting European banking norms as part of the country's overall bid to gain entry to the EU. According to the central bank, some 10 banks in Latvia currently do not meet that requirement.

Ludmila Vojevoda, head of the Banking Regulations and Analysis Division of the Bank of Latvia, told "RFE/RL Newsline" that both challenges are forcing small banks to consider merging with other small banks or being taken over by larger partners. She points out that while Latvia, with a population of some 2.4 million, has no fewer than 26 banks still operating, the top 10 banks account for 80 percent of the sector's total assets. She predicts that by year's end, the number of banks continuing to function will be cut by about one-third as a result of consolidation.

(Estonia, whose population totals 1.4 million, has already witnessed the consolidation of its banking sector and now has only six commercial banks. Lithuania, with some 3.7 million residents, has 10.)

As an alternative to a merger or take-over, some banks are reported actively seeking a foreign strategic investor. Over the past year, several Scandinavian banks have entered the Latvian market: Sweden's Skandinaviska Enskilda Banken has bought nearly half of Latvia's largest bank, Unibanka, while Swedbank is represented by Hansabank and MeritaNordenbanken recently bought out the small Latvian Investment Bank. Vojevoda comments that judging by the number of queries the Bank of Latvia has received from abroad, more Western investments could be forthcoming.

Such a development might help meet another, and possibly even more difficult, challenge: regaining Latvian residents' faith in the banking sector. That faith was shattered in 1995 when the country's largest bank--Banka Baltija--went bankrupt, triggering a chain reaction throughout the sector. Over the past several years, confidence had been slowly increasing until the August 1998 crisis in Russia prompted a run on Latvia's banks, with an estimated 14 percent of Latvian residents withdrawing their money for fear of a repeat of the 1995 scenario.

In an interview with "RFE/RL Newsline," Aigars Laizans, the marketing manager of MeritaNordenbanken's Latvian subsidiary, pointed to the importance of overcoming the psychological impact of the Russian crisis. "Clients feel insecure in the present environment," he said, "and therefore one of the banks' main tasks must be to seek to boost confidence" in the sector. Above all, he argues, banks must assume the role of a "glass-house," showing the public that they are both "stable and safe." At the same time, he admits that many Latvian depositors are likely to have more trust in a bank that has Western backers, even though this is no guarantee against insolvency, as the case of Rigas Komercbanka amply demonstrated.