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Newsline - January 3, 2002

In his New Year's address to the country televised by ORT and RTR, President Vladimir Putin said that in the past year "not all that was planned has been completed, and there are still more unsolved problems than accomplishments achieved." He noted that "not all Russians are living better, and not all can achieve this without the support of society and the state." However, he said 2001 was a year in which Russia not only maintained but enhanced its economic growth, adopted several important legislative packages, and regained trust and bettered its reputation in the international arena. VY

Speaking to members of Premier Mikhail Kasyanov's cabinet on 29 December, Putin said that he is satisfied with the government's work in 2001, and especially with its achievements in the economic sphere, Interfax reported. The president commended Russia's reduction of its state debt by $10 billion, and that it did so "without external refinancing." He added that another formidable achievement was GDP growth of 5.2 to 5.3 percent, which "may eventually be 5.5 percent when the final quarter's results are calculated." As for 2002, he said the top priorities for the Russian economy will be the restructuring of domestic natural monopolies, and the country's integration into global economic infrastructures such as the World Trade Organization. VY

"Izvestiya" reported on 29 December that at a meeting the previous day with his presidential envoys for the seven federal districts, President Putin told his representatives that in 2002 their main task will be focusing on the distribution of power between the various levels of government. In particular, the envoys should examine the division of power between governors and mayors. According to the daily, the president will hold at least two meetings with Russian mayors. At one, the envoys will gather mayors from their federal districts for a meeting to be attended by Putin. And in the second, Putin will meet personally with mayors of cities whose populations are over 1 million people. Russia has 13 cities in this category, the daily reported. The envoys' previous task of harmonizing local and federal laws is considered finished, and has entered the stage of being "permanently controlled." JAC

Foreign Minister Igor Ivanov said in interview with RIA-Novosti on 29 December that 2001 was "the year of Russia's return to the international arena as a key player." He noted that the year's achievements included Russia's radically improved relations with the United States and NATO, cementing ties with China and India, and its dialogue with Japan. For the first time in a decade, Ivanov said, the country's diplomacy became visible in Latin America and Africa, and above all Russia strengthened its positions and interests inside the CIS. Meanwhile, Federation Council Foreign Affairs Committee Chairman Mikhail Margelov told on 28 December that Russia's joining of the antiterrorist coalition following the 11 September attacks on the United States, the robust growth of the Russian economy, and President Putin's foreign policy were the key factors in changing the international environment to Russia's benefit. Valerii Manilov, the former first deputy defense minister and current representative of Primorskii Krai in the Federation Council, told the website that rapprochement of Russia and the United States "is so valuable by itself that it can well compensate for the mistaken and unilateral withdrawal by Washington from the ABM Treaty." VY

In an article on 29 December listing its various "people" of the year for 2001, "Vedomosti" singled out Mikhail Fridman, the head of the Alfa Group, as the only Russian businessman who can compare to their choices as the top entrepreneur in previous years. According to the daily, only Fridman is the equal to former Sibneft head Roman Abramovich and Russian Aluminum head Oleg Deripaska in terms of "aggressiveness," and Fridman "has achieved almost everything." Alfa Bank, which is one of the subsidiaries of Alfa Group, is one of Russia's largest banks, both in terms of assets and attracting deposits. The Tyumen Oil Company, which is also controlled by the Alfa Group, has ended its war with Interros head Vladimir Potanin for the Sidanko company and has partnered itself with British Petroleum. In addition, the Alfa Group has enlarged its presence in the telecommunications and insurance sectors by obtaining shares in VympelKom and Golden Telecom and forming the Alfa Insurance company. JAC

A federal court in the Moscow district ruled on 29 December that an earlier decision by a lower court liquidating TV-6 is invalid, Russian agencies reported. The case has now been returned for new consideration and additional investigation. TV-6 General Director Yevgenii Kiselev praised the decision, noting that "there remain judges in Russia who judge on the basis of both law and their conscience." He added that he is "relaxed" about a new hearing of the case in part because new provisions of the law on joint-stock companies were to come into effect beginning on 1 January (see "RFE/RL Newsline," 28 December 2001). JAC

Oleg Mironov, the presidential ombudsman for human rights, told reporters on 2 January that Russia made no progress in improving its human rights record last year, Interfax reported. According to Mironov, Russian citizens "feel absolutely helpless should the police, prosecutors, and courts combine to launch an onslaught against them." He also noted that a further erosion of rights has occurred in the political sphere because of recent regional and municipal elections that "sometimes are not elections at all, but either an appointment or an attempt to buy a deputy's mandate." JAC

U.S. Ambassador to Russia Alexander Vershbow told Ekho Moskvy radio on 27 December that Washington is "very attentive to the opinion of Russian human rights activists that [military journalist Grigorii] Pasko's case might be politically motivated and that accusations against him are unfair, because in reality Pasko wanted nothing more than to protect the environment." On 26 December, German Foreign Minister Joschka Fischer told ORT that his country supports the European Union's call to review the decision. Fischer said Pasko's trial is evidence of the unfavorable situation regarding the mass media and human rights in Russia. Meanwhile, a spokesman for the prosecution in the trial told Interfax on 25 December that it considers the verdict "too soft," and will file an appeal to the Supreme Court. VY

On 3 January, Sergei Ivashchenko, the head of the Vladivostok Committee for Grigorii Pasko's Defense, organized a meeting attended by representatives of public organizations, mass media groups, political parties and movements, as well as members of the State Duma and regional and municipal parliaments, Russian agencies reported the same day. The committee adopted an appeal to the Russian president, the prosecutor-general, the Supreme Court, Russian citizens, and political parties, in which it urged the president "to curb the special services that are mocking the law," and demanded that a verdict of not guilty be handed down to Pasko, as was earlier done in the case of naval officer and environmentalist Aleksandr Nikitin. In addition, Ivashchenko announced that on 10 January the committee plans to picket the building of the Pacific Fleet security department, the Pacific Military Prosecutor's Office, and the Pacific Fleet court, reported. VC

Addressing Audit Chamber board members on 28 December, President Putin said the agency must be "politically neutral and unbiased" in its investigations, and should not duplicate the work of other institutions monitoring the spending of state budget funds, reported. Alluding to several recent public statements made by Audit Chamber head Sergei Stepashin pertaining to certain investigations, Putin said the agency "has very strong prerogatives and tools" and should thus use them "with minimum publicity." Putin also called on the chamber to increase cooperation with the presidential administration's control department. VY

A spokesman for Prosecutor-General's Office told Interfax on 2 January that last year his agency investigated about 8,000 corruption cases among Russian officials, an increase of 14 percent compared to 2000. In particular, criminal cases were opened against heads or deputy heads of administrations in the Vladimir, Tver, Kurgan, Moscow, Novosibirsk, and Kemerovo Oblasts, as well as the Evenk Autonomous Okrug. In addition, the heads of 18 federal agencies were investigated for corruption or other economic crimes. He estimated that in today's Russia up to 50 percent of criminal income is spent on bribing corrupt officials. VY

Sukhoi head Mikhail Pogosyan told reporters on 27 December that 2001 was its best year since the collapse of the Soviet Union, "The Moscow Times" reported. Pogosyan said Sukhoi delivered 50 jets to clients this year, but declined to reveal financial details. Konstantin Makienko, the deputy head of the Center for Analysis of Strategies and Technologies defense research center, said most of Sukhoi's revenues probably came from the delivery of 40 Sukhoi fighters to China under contracts signed in 1999, and 10 to Algeria as part of a contract signed last year. Makienko estimated that altogether those deliveries fetched around $1.7 billion. President Putin told the Security Council on 26 December that Russia earned revenues of $4.4 billion from arms sales, Interfax reported, well over the $2.84 billion figure for last year. VC

Speaking at a government meeting on 1 January, Prime Minister Kasyanov announced Russia's implementation of the decision adopted last month to cut oil exports by 150 barrels per day, reported the same day. Kasyanov noted that the cuts reflect the interests of the government, Russian oil traders, and OPEC countries. He said that, while Russia holds out hope that global oil prices will stabilize at $20-$25 a barrel, "we will also smoothly survive at a price of $18.5. However, below this level problems will begin." VY

Syktyvkar State University in the Komi Republic has been licensed by the Russian Education Ministry to train specialists in the field of "comprehensive information protection," Interfax reported on 1 January. The program for information security has been agreed upon with the Federal Security Service of both the Russian Federation and the Komi Republic. In addition, the republic's tax authorities have declared that they too need antihacker specialists. Therefore, the university will develop a course for specialization in information security related to taxes and taxation. The anticipated enrolment for both specializations will be 25 students per group. The students will be taught by faculty from the departments of physics, mathematics, and economics, Interfax added. VC

Sverdlovsk Oblast newspapers published on 28 December a new law that will allow incumbent oblast Governor Eduard Rossel to seek a third term. Legislators in Sverdlovsk Oblast's Duma voted on 21 December to support an amendment to the oblast's existing laws, which makes the number of terms the same person may be elected as governor the same as under federal law, according to ITAR-TASS. Sakha President Mikhail Nikolaev was recently blocked from seeking a third term in his region because local law forbids such a possibility (see "RFE/RL Newsline," 14 December 2001). According to, Rossel accused the Moscow-based leaders of the Union of Rightist Forces of trying to pressure local legislators into not supporting the new legislation. JAC

President Putin signed decrees reshuffling personnel before the end of the year. On 30 December, Putin appointed Andrei Denisov, who was most recently Russian ambassador to Egypt, as deputy foreign minister in charge of international economic cooperation. According to ITAR-TASS, Denisov is the 15th deputy foreign minister. On 29 December, Putin dismissed Vladimir Rakhmanin as chief of presidential protocol and named him Russian ambassador to Ireland. Rakhmanin will be replaced by Igor Shchogolev, who was head of the presidential press service. The same day, Putin made Anatolii Pristavkin, who was most recently the head of the Presidential Pardons Commission, one of his advisers (see "RFE/RL Newsline," 28 December 2001). JAC

Meanwhile, Ekho Moskvy radio reported on 1 January that Russian diplomats will start wearing a new uniform as of 2002. Those male diplomats with the rank of ambassador will have to wear a double-breasted black jacket with golden embroidery on the collar and cuffs, black trousers, a gray shirt, a silk gray tie, black cap with a peak and a badge, and white kid gloves. The report did not mention what female ambassadors should wear. Russian ambassadors serving in tropical locations will have the option of donning a special sand-colored uniform, according to the station. JAC

In 2001, the leading world fashion houses increased the sale of their name brands in Russia by 50 percent, transforming Moscow into one of the centers of chic clothes, reported on 28 December. The website reported that Gucci's Moscow boutique placed second in revenues after its New York store; Dolce & Gabbana's outlet came in second to its primary store in Milan; Fendi's Moscow branch came in third to those in New York and Rome; and Chanel's Moscow shop was third to that company's outlets in Paris and New York. VY

Ruslan Aushev formally relinquished his powers as president of Ingushetia on 29 December, ITAR-TASS reported, having announced two days earlier that he would not seek a third presidential term. Aushev explained his decision in terms of the need to preserve domestic political stability which, he argued, would be threatened if presidential and parliamentary elections are held simultaneously in March 2003. Aushev was re-elected in 1998 for a second five-year term, but in November 2001 Ingushetia's parliament voted to shorten the presidential term by one year to four years, and scheduled presidential elections for 1 March 2002; Ingushetia's Supreme Court, however, apparently under pressure from Moscow, on 26 December declared that amendment invalid, according to RFE/RL's Russian Service on 27 December (see "RFE/RL Caucasus Report," Vol. 5, No. 1, 3 January 2002). LF

During talks in Yerevan on 28 December between Armenian government officials and visiting Russian Deputy Prime Minister Ilya Klebanov, agreement was reached on the list of state-owned enterprises of which Moscow will be granted ownership in repayment of Armenia's debt, RFE/RL's Yerevan bureau reported. According to Seyran Shahsuvarian, a spokesman for Defense Minister Serzh Sarkisian, they are the Hrazdan thermal power plant (Armenia's largest), the Mars electronics factory in Yerevan, and three research institutes that were part of the Soviet-era military-industrial complex. Armenia reportedly rejected a Russian demand that lucrative mines and power grids also be included on the list. But although Klebanov said upon his arrival in Yerevan that the deal would clear Armenia's entire $94 million debt, Shahsuvarian told journalists on 29 December that the proportion of the debt cleared would be calculated only during the first quarter of 2002 on the basis of an audit of the five enterprises. LF

By a vote of 85 for and 21 against, with four abstentions, deputies approved the 2002 budget on 28 December, RFE/RL's Yerevan bureau reported. Four days earlier, the government had raised both planned revenues and expenditures by 3.1 billion drams ($5.5 million) to 217 and 260 billion drams respectively, which is far less than foreseen in amendments proposed during the weeklong debate on the draft bill, which would have raised spending by 24 billion drams (see "RFE/RL Newsline," 14 December 2001). The planned revenue target is 13 percent higher than in 2001, which Deputy Finance and Economy Minister Pavel Safarian admitted on 24 December is "ambitious." If fulfilled, it will reduce the fiscal deficit by more than 20 percent, to 3.2 percent of planned GDP. External borrowing accounts for a lower proportion of revenues than in 2001. GDP growth is anticipated at 6 percent. LF

President Heidar Aliev issued a decree on 27 December outlining measures the government must adopt to alleviate the financial and administrative constraints on independent and opposition media outlets, Turan and ITAR-TASS reported. Those measures include the abolition of customs duties for newsprint, National Bank soft loans for media outlets, reducing tariffs for the allocation of private TV and radio broadcasting licenses, guaranteeing that the state publishing house will print opposition newspapers, and removing obstacles to newspaper distribution. The same day, parliament deputies voted unanimously to adopt the amendments they had discussed the previous day to the law on the media (see "RFE/RL Newsline," 28 December 2001). Those amendments remove the constraints on receiving funding from abroad and on registration of new media outlets. LF

President Aliev issued a further decree on 29 December under which 59 people will be released from prison and a further 27 will have their prison terms halved, Turan reported. According to ITAR-TASS, the beneficiaries include 35 members of the now-disbanded special police (OMON) imprisoned for their participation in an insurgency in March 1995, but not former Defense Minister Rahim Gaziev, former Interior Minister and Boz Gurd party Chairman Iskander Hamidov, Alikram Gumbatov, and several others regarded by the Council of Europe as political prisoners who should be freed. In an interview published in "Zerkalo" on 14 December, Oktay Khalilov, who is deputy chairman of Boz Gurd, had expressed confidence that Hamidov would be released. He added that Hamidov planned to run in the presidential elections due in October 2003. LF

Azerbaijani security officials have arrested six members of a cell of the banned Islamic organization Hizb ut-Tahrir, Turan and Western news agencies reported on 2 January. Five of those detained are citizens of Azerbaijan and one of Ukraine. The group's leader was identified as Abdulrasul Abdurahimov, a citizen of Uzbekistan wanted on charges of calling for the overthrow of the Uzbek leadership. Turan quoted an Azerbaijani National Security Ministry official as saying that the detainees were planning terrorist attacks on the U.S. Embassy in Baku and the offices of unnamed international organizations. Hizb ut-Tahrir, however, generally eschews violence; its members in Uzbekistan and Kyrgyzstan advocate the establishment of an Islamic state by exclusively peaceful means. LF

Several thousand people participated in a sanctioned demonstration in Baku on 29 December organized by the opposition Democratic Congress, Turan and Interfax reported. Participants demanded that the Azerbaijani leadership break off negotiations with Armenia on resolving the Karabakh conflict and instead take "decisive steps" to liberate the Azerbaijani territories currently under Armenian control. They also protested the Azerbaijani government's decision to abolish special allowances for the most impoverished strata of the population. LF

The Georgian Foreign Ministry issued a statement on 24 December expressing concern over a demand by the "New Right Wing" parliament faction that Dieter Boden, who is UN Secretary-General Kofi Annan's special envoy for the Abkhaz conflict, be replaced as his activities "contradict the interests of Georgia's security," Caucasus Press reported (see "RFE/RL Newsline," 19 December 2001). The Georgian Foreign Ministry expressed gratitude for the UN's "significant" role in mediating a solution of the Abkhaz conflict. Faction member Irakli Batiashvili specifically condemned the draft document authored by Boden on the optimum division of powers between the central Georgian government and the leadership of the breakaway Republic of Abkhazia, which according to Batiashvili describes Abkhazia as "a sovereign entity within Georgia." Georgian President Eduard Shevardnadze similarly rejected the demand for Boden's replacement as "tactless" and "inappropriate." Shevardnadze also dismissed fears that the description of Abkhazia as a "sovereign entity" could be construed as formal recognition of the republic's independence. LF

The Georgian Defense Ministry will advise the country's leadership to ignore a joint demand by the Abkhaz government and the UN Observer Mission in Georgia (UNOMIG) to withdraw the estimated 350 Georgian troops currently deployed in Abkhazia's Kodori gorge, Georgian Deputy Defense Minister Gela Bezhuashvili told Caucasus Press on 26 December. Georgian military officials have consistently argued that those troops' presence in Kodori is necessary to protect the local Georgian population. But a UNOMIG patrol of Kodori on 25 December ascertained that there are no Abkhaz troops in the area that could pose any threat to Georgian residents, Caucasus Press reported. LF

President Shevardnadze ordered the murder in late 1993 of ousted President Zviad Gamsakhurdia with the consent of then-Russian President Boris Yeltsin, Giorgi Kervalishvili, the president of the All-Georgian Association of Human Rights, told Caucasus Press on 28 December. Kervalishvili claimed that subordinates of former Security Minister Shota Kviraia were responsible for killing Gamsakhurdia. Many Georgians doubt the statement made by Gamsakhurdia's widow Manana shortly after his death that he committed suicide (see "RFE/RL Caucasus Report," Vol. 4, No. 15, 20 April 2001). LF

Former Pavlodar Oblast Governor Ghalymzhan Zhaqiyanov, who is one of the cofounders of the "Democratic Choice for Kazakhstan" (DVK) Movement, told RFE/RL on 28 December that two of his former deputies have been arrested and interrogated. One of them, Aleksandr Ryumkin, was subsequently hospitalized after suffering a nervous breakdown and heart problems. The second, Sergey Gorbenko, has been accused of the illegal privatization of state-owned depots in Pavlodar, RFE/RL's Kazakh Service reported on 2 January. He has begun a hunger strike in detention. In an interview with "Nezavisimaya gazeta" published on 28 December, Zhaqiyanov enumerated five key demands that DVK leaders made in an open letter addressed to Kazakh President Nursultan Nazarbaev earlier that month: ensuring the separation of powers and mutual independence of the executive, legislative, and judicial branches while increasing the powers of the executive; introducing elections for the posts of regional administrators; changing the procedure for the selection of members of electoral commissions; reforming the court system (at present all 2,500 judges are chosen by one individual); and liberalizing the media and dismantling the virtual media monopoly exercised by members of Nazarbaev's family. LF

Following talks in Washington last month, Republican People's Party of Kazakhstan leader Akezhan Kazhegeldin, executive committee Chairman Amirzhan Qosanov, Azamat Party Co-Chairman Petr Svojk, and leading People's Congress of Kazakhstan member Gulzhan Ergalieva have signed an agreement on merging the three parties to form a new United Democratic Party, "SolDat" Editor Ermurat Bapi told RFE/RL's Kazakh Service on 25 December. The catalyst for the merger, which was formally announced at a press conference in Almaty the same day, was the political crisis in late November 2001 that culminated in the demotion of President Nursultan Nazarbaev's son-in-law Rakhat Aliev and the formation of the opposition DVK. The new party's primary objective is to establish a parliamentary republic in Kazakhstan. LF

The Foreign Affairs Committee of the Legislative Assembly (the lower chamber of Kyrgyzstan's bicameral parliament) approved on 25 and 28 December respectively separate requests by the Kyrgyz government to grant France and Canada use of Kyrgyz airfields for the duration of the international antiterrorism operation in Afghanistan, RFE/RL's Bishkek bureau reported. Both chambers of parliament must now approve those requests. A French military delegation arrived in Bishkek on 2 January for talks with Kyrgyz Defense Minister Esen Topoev on the planned deployment at the Manas international airport near Bishkek of some 250 French troops and several military aircraft. LF

After a four-month trial, a district court in Bishkek handed down the death penalty on 31 December to a Uighur from Uzbekistan on charges of the murders in Bishkek in March 2000 of the head of the local Uighur organization and in May 2000 of three visiting Uighur officials from China's neighboring Xinjiang Autonomous Region (see "RFE/RL Newsline," 29 March and 29 May 2000, and 16 August 2001), RFE/RL's Bishkek bureau reported on 2 January. Three other Uighurs, one from Turkey and two from China, received prison sentences of between 16 and 25 years on the same charges. The men were also accused of kidnapping a Chinese businessman in Osh and of belonging to a separatist Uighur organization based in China. AP on 3 January quoted court Judge Marat Osmonkulov as saying he is confident that the sentences will not be overturned by a higher court. LF

Alain Richard held talks in Dushanbe on 2 January with Tajik President Imomali Rakhmonov on the situation in Afghanistan, cooperation in the ongoing international antiterrorism operation, and expanding bilateral relations, ITAR-TASS and Asia Plus-Blitz reported. Richard expressed appreciation of Dushanbe's "friendly gesture" in facilitating the transit across Tajik territory of humanitarian cargos and French troops bound for Afghanistan. Richard also met with his Tajik counterpart Colonel General Sherali Khairulloev to discuss the deployment of French military aircraft in Tajikistan for a period of four to six weeks until facilities in Afghanistan are repaired. Khairulloev subsequently told journalists that the French peacekeeping contingent currently in Tajikistan will fly to Afghanistan within the next six-seven days. Richard and Khairulloev also discussed the prospects for expanding bilateral military cooperation, notably in the sphere of military training. LF

Members of the Tajik Interior Ministry's special assignment brigade took part in fighting in Afghanistan in recent months on the side of the anti-Taliban Northern Alliance, "Nezavisimaya gazeta" on 26 December quoted the brigade's commander, Major General Sukhrob Kasymov, as telling RTR television. The Tajik servicemen involved included artillery and reconnaissance specialists and drivers of tanks and armored personnel carriers. It is not clear whether any members of the elite brigade remain in Afghanistan. LF

There is no truth to Russian media reports that Dushanbe plans to charge Moscow up to $250 million annually for the continued presence on Tajik territory of the Russian 201st Military Rifle Division, Tajik Foreign Ministry spokesman Igor Sattarov told Asia Plus-Blitz on 26 December. "Izvestiya" on 25 December and "Nezavisimaya gazeta" on 26 December had both suggested Dushanbe might do so. The two countries' defense ministers signed an agreement in April 1999 on the status of the Russian military presence in Tajikistan (see "RFE/RL Newsline," 19 April 1999), but that agreement does not require Russia to pay for the use of Tajik facilities. On 27 December, Asia Plus-Blitz quoted an unnamed Russian Embassy official in Dushanbe as saying that "working consultations" are underway on unspecified aspects of the agreement, but that its basic provisions will not be altered. LF

A Tajik government delegation headed by Minister of Economy and Trade Hokim Soliev attended the second session of the Tajik-Turkish commission on economic and trade cooperation in Ankara on 22-29 December, Asia Plus-Blitz reported. The two sides signed an agreement on long-term cooperation in the spheres of economy, trade, mining, agriculture, transport, and tourism. The Tajik delegation also met with Turkish businessmen interested in investing in Tajikistan's aluminum, mining, textile, and tourism industries. The two sides agreed to consider issuing multiple-entry visas for businessmen. Turkey also undertook to help modernize and develop the Tajik railway and highway network, and airports at Kulob and Danghara in order to facilitate bilateral trade, Asia Plus-Blitz reported on 3 January. LF

Meeting in Tashkent on 27-28 December, the presidents of the four members of the Central Asian Economic Community reaffirmed their shared commitment to expanding mutual political and economic ties and to working together to counter threats to regional security posed by international terrorism, religious extremism, drug trafficking, and organized crime, the Uzbekistan National Information Agency and "Kazakhstanskaya pravda" reported. They also affirmed their support for the interim Afghan government headed by Hamid Karzai, and offered humanitarian and other assistance in building a democratic Afghan state. The four presidents focused specifically on the need for a coordinated program of measures regulating the use of trans-border water resources. They also decided the change the official title of the community to Central Asian Cooperation (Tsentralno-Aziatskoe Sotrudnichestvo). Uzbek President Islam Karimov proposed organizing a conference of Central Asian businessmen in order to boost economic cooperation. LF

Speaking on 28 December at the close of the Tashkent summit, President Karimov said that he has set no deadline for U.S. troops to leave Uzbekistan after the end of the international antiterrorism operation in Afghanistan, Reuters reported. "We have had no negotiations with the Americans many years they will use the Khanabad [air] base," Karimov told journalists. He also rejected as "outdated cliches" talks of Russian concern over a U.S. military presence in the former Soviet sphere of influence. LF

Oral Saulebay, a leading member of the opposition Azamat party and chairman of the Committee for the Protection of Kazakh Land, was detained by Uzbek police on 30 December in the border village of Baghys on suspicion of insulting the honor and dignity of the presidents of Uzbekistan and Kazakhstan, RFE/RL's Kazakh Service reported on 2 January. On 28 December, some 2,500 Kazakh residents of Baghys and the nearby village of Turkestanets staged a demonstration to draw to the attention of the Kazakh and Uzbek leaderships the problems local residents face due to the fact that the border between Kazakhstan and Uzbekistan has still not been formally demarcated. The protesters threatened to declare an Independent Baghys Republic if the border issue is not resolved in the near future. LF

The Belarusian Foreign Ministry said in a statement marking the 10th anniversary of the establishment of U.S. and Belarusian relations that ties between the two countries "have not been easy," AP reported on 29 December. The statement said that although relations were solid initially, they worsened soon thereafter and political contacts were virtually frozen later. The statement also criticized the U.S. for maintaining cool relations with Minsk. The statement did not address why U.S.-Belarusian relations are in such a weak state and did not mention Belarusian President Alyaksandr Lukashenka, the main source -- in Washington's view -- of the various diplomatic and political problems between the two countries. PB

Colonel General Leanid Maltsau said that 2002 will be a busy year of reform for the Belarusian military, ITAR-TASS reported on 30 December. Maltsau said that if changes are not made within the armed forces, they "will fail to meet the demands of the swiftly changing international situation. They will simply stop reckoning with us." He added that the reform has been planned for "every day" until 2005. The military currently has 83,000 troops, and is set to be reduced to 65,000 by 2006. Maltsau said there will be changes in the structure of the armed forces, that "control over army units will be enhanced," maintenance costs will be reduced, and the social problems experienced by those in the military will be "solved." The Belarusian legislature is to debate a bill on military service during its next session that would reduce the term of mandatory service for recruits. PB

A Ukrainian high court on 29 December rejected as unconstitutional a decade-old, blanket ban on the Soviet-era Communist Party, Reuters and other agencies reported. A communist leader and the speaker of the Crimean parliament, Leonid Hrach, said, "Despite huge regret that we needed 10 years to come to this natural and evident truth, this is a great victory," Reuters reported. Interfax said Hrach called it a "victory for common sense." In its ruling, however, the Ukrainian Constitutional Court rejected calls for communist assets -- which included dozens of government buildings, rest homes, and health facilities -- to be returned to the party. Only the courts have the power to exclude political parties, the court said. The prohibition has been largely ignored since it was imposed on the country, where the revamped Communists are the largest party in the 450-seat assembly. AH

Nationals from throughout much of the former Soviet Union were allowed visa-free entry to Ukraine beginning on 1 January, agencies reported the same day. The move implements a cabinet decision from May to lift the requirements on citizens from Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, according to Interfax. Citizens of Belarus, Russia, Georgia, and Turkmenistan already could travel without a visa to Ukraine. Citizens of the Commonwealth of Independent States need only to present their passports to enter the country, ITAR-TASS added. AP reported that an agreement on visa-free travel also came into effect between Ukraine and Moldova on 1 January, although ITAR-TASS cited a Ukrainian official as saying that talks are still underway on that issue. AH

A Ukrainian court on 28 December postponed its decision on whether to allow independent Radio Kontinent to continue broadcasting in a case that the Council of Europe has called a test of media freedom, AP reported. The court was expected to issue its ruling some eight months after Ukraine's National Television and Broadcast Council revoked Kontinent's license, citing an outstanding debt. Others, including Council of Europe Secretary-General Walter Schwimmer, have suggested the move was politically motivated. "Radio Kontinent challenged this decision in court almost a year ago, and no court action has been taken since then," Schwimmer said in a statement issued from Strasbourg and quoted by AP. He urged authorities to allow the station to broadcast until a decision is made, the agency added. AH

Heavy snow left highways and minor roads impassable and left huge numbers of people in four regions of Ukraine without electricity, Interfax and other agencies reported on 2 January. Interfax cited the Emergency Situations Ministry as saying that some 289 towns and villages in the west of the country were without electricity, while more than 400 settlements suffered power outages at some point. An international battalion made up of Ukrainian, Romanian, Hungarian, and Slovak troops was helping clear roads in the aftermath, AP reported. AH

The Estonian Genome Foundation, EGeen company, and the U.S.-registered EGeen International Corporation (EGI) signed agreements on 31 December on the financing of a genetic database pilot project, ETA reported on 2 January. EGI pledged to cover the estimated $2.5 million cost of the project in five parts, and made the first $100,000 payment after the signing. Health data and tissue samples of 10,000 donors will be first collected in the counties of Saaremaa, Laane-Virumaa, and Tartumaa to test the developed model of the project and the security and quality of the processes. The Genome Foundation project aims to study the genes of Estonians by taking blood samples from as many volunteers as possible. Genetic cards will be created for all participants and this information will be used to improve the health situation of Estonians by taking hereditary data into consideration. SG

Judge Inara Steinerte of the Riga Regional Court completed reading out the more than 1,000-page verdict in the Banka Baltija fraud trial on 28 December, LETA reported. She started reading the sentence on 19 December. The verdict found former Bank Baltija board Chairman Aleksandrs Lavents and President Talis Freimanis guilty of intentionally leading the bank to bankruptcy, the establishment of fictitious companies for taking out loans, and large-scale embezzlement. They were handed prison sentences of nine and six years respectively, and their property was confiscated. Alvis Lidums, the head of the law office Birojs L&A was sentenced to three years and three months imprisonment for embezzlement, but was released because he has already served that time. The court satisfied the civil claim by Latvenergo electricity utility company of 8 million lats ($12.55 million) from the defendants, but rejected a claim of the Bank Baltija liquidator for 26 million lats, saying a separate claim can be filed through a civil proceeding. Banka Baltija went bankrupt in 1995, and charges against the defendants were made in 1996. SG

Mazeikiai Oil announced on 2 January that its losses in the first 11 months of 2001 were 89.5 million litas ($47.4 million), ELTA reported. This is 43.4 million litas more than the losses in the same period last year even though the volumes of all its operations were greater. The refinery processed more than 6 million tons of crude oil in the first 11 months, a 43 percent increase compared to the same period in 2000. The Birzai pipeline pumped 28.3 million tons of oil, or 6.1 million tons more than in 2000. The amount of oil shipped through the Butinge platform increased by 1.9 million tons to 5.1 million tons. The company remained Lithuania's largest taxpayer, paying a total of 1.8 billion litas in the 11-month period, including 1.01 billion litas for value added taxes and 686 million litas for excise taxes. SG

The Finance Ministry on 29 December opted to raise excises on fuel by 2.6 percent and on tobacco by 4 percent in January, PAP reported. The tax on a ton of unleaded gasoline rose from 1,427 to 1,464 zlotys ($359.27 to $368.59), a move that came into effect on 1 January. Tobacco will be more expensive beginning 16 January, when the excise tax on a 20-pack of cigarettes increases from 1 to 1.04 zlotys. AH

Leszek Miller's government issued its "Opening Report" on 2 January, acknowledging "many positive changes" but blaming former Prime Minister Jerzy Buzek's administration for the sickly Polish economy, news agencies and local media reported. The nearly 80-page document said the new government inherited a slowing economy, skyrocketing unemployment, and a crisis in public finances when it took over in the autumn. It argues that the country needs urgent measures to spur a recovery, some of which will require sacrifice. "In the four years of Buzek's rule, the annual growth rate fell from 7 to 1 percent, industrial production growth was one-quarter that in the preceding four years, enterprise profitability declined to almost nil, unemployment grew by 1 million, the jobless rate soared to nearly 17 percent, and society came to feel a dramatic division into 'them,' i.e., those in power, and 'us,' that is, those bearing the cost of economic changes," the report charged. A former Buzek aide, Andrzej Urbanski, accused the Miller administration of "eliminating the opposition parties from any kind of cooperation," which he said threatened to render wise economic and social policies "impossible," PAP reported on 2 January. AH

Heavy snowfall continued to plague Poland on 2 January, halting road, rail, and air traffic and downing power lines across the country, AP reported. Snow blocked roads in eight southern provinces and held up trains between Krakow and the capital, while schools remained closed and hospital services were curtailed. Trees felled by snow and wind took down power lines, cutting off electricity to roughly 150 villages in the southern Podlaskie region, while several towns in the north also lost power, AP said. In the southern region of Legnica, officials said 90 percent of train connections were canceled, the agency added. Reuters reported on 31 December that five people, including two rescuers, were killed in avalanches in Poland as rescue teams searched for missing tourists in the southern mountain areas. AH

The weekly "Profit" said on 2 January that the opposition Four Party Coalition could miss out on state subsidies in a key election year, citing sources at the Czech Finance Ministry, CTK reported. The Four Party Coalition does not enjoy legal status and therefore cannot be subsidized for campaign expenses, the magazine wrote. Legislative experts quoted by the magazine said the country's election law must be amended to allow financial assistance to the three parties that make up the coalition. Money cannot be paid to the coalition or its respective members -- the Christian Democrats, the newly merged Freedom Union-Democratic Union (US-DEU), and the Civic Democratic Alliance -- since a binding agreement on dividing up such subsidies can only be made between legal entities, they reportedly said. Senior members of the coalition disagreed, with former Finance Minister and US-DEU member Ivan Pilip calling that interpretation "impossible and clearly challengeable in legal terms." The Four Party Coalition will not seek an amendment to the electoral law, he added. AH

A Czech police investigator said on 2 January that efforts have so far failed to deliver documents informing representatives of the Harvard Investment Funds group of criminal charges against them, CTK reported. Investigator Vaclav Laska has accused Czech-born Viktor Kozeny and the former chairman of Harvard Industrial Holding, Boris Vostry, of fraud (see "RFE/RL Newsline," 14 December 2001). But Kozeny lives in the Bahamas and Vostry is a citizen of Belize, neither of which has a legal cooperation agreement with the Czech Republic. The charges must be redrafted and sent again under a Penal Code amendment that came into force this year, Laska added. AH

The Interior Ministry published statistics on its website showing a year-on-year decline of more than 8 percent in the number of crimes committed in the country in 2001, CTK reported on 28 December. Roughly 331,000 crimes were registered between January and November, compared to 360,000 crimes during the same period in 2000, the agency said. By the end of November, police reported investigations into 216 murders, compared to 250 in 2000. AH

Rudolf Schuster and his wife, Irena, were "slightly" injured on 2 January when the presidential motorcade was involved in a nine-vehicle accident that injured seven other people, dpa and TASR reported. Authorities blamed the mishap on dense fog, TASR said. Schuster, who turns 68 on 4 January, and his wife were returning to the capital when the accident occurred. The president was hospitalized, but hoped to be released soon enough to carry on with his schedule, a spokesman said. AH

The chairman of the Party of the Democratic Left (SDL), Pavol Koncos, has excluded the possibility of a future coalition with parties based on ethnic principles, the daily "Sme" reported on 3 January. That position would presumably rule out alliances including the Hungarian Coalition Party (SMK) or the Slovak National Party (SNS). A deputy chairman within SDL, Ladislav Orosz, joined one of the party's members of parliament in challenging Koncos's stance, the paper reported. AH

Some of the country's largest electricity users were free to choose their power suppliers beginning on 1 January, TASR-Slovakia reported on 2 January, a move that translates into liberalization of about 30 percent of the market. There are 15 companies that purchase more than 100 GWh of electricity per year in the country, the floor set by the Economy Ministry before a user can select a Slovak supplier other than Slovenske Electrarne. They include local industrial giants like smelter Slovalco, U.S. Steel Kosice, oil refiner Slovnaft, gas company SPP, and Slovak Railways. The market will be freed up for consumers of more than 40 GWh beginning on 1 January 2003, the agency reported. AH

Hungary's diplomatic offices in neighboring countries on 2 January began receiving applications for Hungarian certificates that entitle the holder to various employment, education, and other benefits in Hungary, "Nepszabadsag" reported on 3 January. The daily said that only a few persons submitted applications for certificates at consulates because most of the offices in Romania, Slovakia, and Serbia could not process them due to technical reasons. Meanwhile, Gyorgy Urban, the office manager at the Interior Ministry's Data Processing, Registration, and Election Office, told reporters that his office will process applications for Hungarian certificates within 30 days. The certificates will be valid for five years and may be extended upon expiration, Urban explained. The Interior Ministry said it envisages being able to issue as many as 120,000 Hungarian certificates per month, Hungarian radio reported. MSZ

Socialist former Prime Minister Gyula Horn said on 28 December that "only a beaten cabinet" could conclude a memorandum of understanding such as that recently signed by the Hungarian and Romanian prime ministers on Hungary's Status Law (see "RFE/RL Newsline," 28 December 2001). Horn called on the cabinet to suspend the implementation of the Status Law, saying it could result in major social tensions, anti-Romanian sentiment, and nationalism. Free Democrat Ivan Peto said the memorandum's lack of requirements for language or other skills for Romanian nationals who seek employment in Hungary could place 1.2 million jobs in jeopardy. Meanwhile, the FIDESZ parliamentary group said it regrets that the Socialists have repeatedly rejected one of the basic principles of the EU, namely the free movement of persons and ideas. Prime Minister Viktor Orban told Hungarian radio on 2 January that the number of job seekers entering Hungary, as well as the number of work permits issued, will be made public, thus allowing everyone to see the "groundless basis" of statements that are aimed at "eliciting fear." MSZ

The "Frankfurter Allgemeine Zeitung" reported on 29 December that the recent resignation of Hans Haekkerup as the UN's civilian administration in Kosova (UNMIK) came because he had lost credibility with the 90 percent ethnic Albanian majority and with the UN (see "RFE/RL Newsline," 28 December 2001). Albanians came to view him as aloof and arrogant. Haekkerup's frequent absences from Kosova to visit his native Denmark recently brought him a verbal rebuke from UN Secretary-General Kofi Annan. The last straw reportedly came in December, when Haekkerup requested a paternity leave of 2 1/2 months to return to Denmark. This cost him his remaining credibility with his associates in UNMIK, the daily noted. His final visit to Kosova -- on 28 December -- lasted less than 12 hours. His interim successor is his American deputy, Charles Brayshaw. PM

The U.S. State Department's office in Prishtina said in a statement that it had a good working relationship with Haekkerup, who resigned on 28 December. In a separate statement, Annan praised his achievements. Serbian Deputy Prime Minister Nebojsa Covic, who is Belgrade's point man for Kosova and Presevo, said he regretted Haekkerup's resignation, the "Frankfurter Allgemeine Zeitung" reported (see "RFE/RL Balkan Report," 6 and 30 November 2001). Rada Trajkovic, who heads the Serbian faction in Kosova's parliament, called Haekkerup "a man of integrity," Reuters reported. Albanian-language media, however, showed undisguised glee at his departure. "Koha Ditore" slammed him in its front-page headline as "the man who left no friend in Kosova." Editor in Chief Blerim Shala of the independent daily "Zeri" said Haekkerup had proven unable to fit into the political culture of the province. Alush Gashi of the Democratic League of Kosova told Reuters: "We supported Mr. Haekkerup's activity at the beginning, but we also strongly rejected some of the documents he signed with Belgrade." PM

Yugoslav President Vojislav Kostunica told the Belgrade daily "Politika," which is close to his views, that "the only certain thing for the next year is there will be elections. We need them if we want to complete constitutional reconstruction both in Serbia and Yugoslavia," AP reported. But Kostunica's rival, Serbian Prime Minister Zoran Djindjic, said early elections "would undermine the quality of the political system and introduce a climate of uncertainty... Elections are a necessity only if political differences are so great that negotiated solutions are impossible." Observers note that Kostunica leads Djindjic in public opinion polls, but that the Yugoslav president's margin of popularity over other Serbian politicians has shrunk in the course of the past year. PM

Perhaps the largest single ethnic group of former Yugoslavs to have worked in Germany over the years are Croats, who also have large quantities of marks spent in Croatia by German tourists. "Jutarnji list" reported on 3 January that Croats deposited some $1.1 billion in bank accounts in December for automatic conversion into euros. But experts estimate that there may be a further $2.5 billion stuffed in mattresses or otherwise hidden away throughout Croatia. PM

KFOR troops helped Albanian army units deliver food to villages in snow-stricken northeastern Albania, AP reported from Tirana on 30 December. Affected are the Tropoja and Peshkopi regions, which are more easily reached from Kosova than from most of the rest of Albania, from which they are cut off by high mountains. Neighboring Macedonia has also been hit by severe winter weather, which is widely regarded as the worst in decades (see "RFE/RL Newsline," 28 December 2001). PM

Kosovars welcomed the introduction of the euro into the province as a step toward its integration into Europe, AP reported from Prishtina on 1 January (see "RFE/RL Balkan Report," 10 July 2001). Most Kosovars had to wait until banks opened on 2 January to obtain the new coins and banknotes, which replace the German mark as legal tender there. U.S. peacekeepers helped promote information about the new currency. Captain Andrew Zacherl told the news agency that long-term U.S. interests are best served by the euro. "If Europe has a stable economy, that means the economy in the States will be stable," he added. PM

Banks and exchange offices opened in Montenegro on New Year's Day to distribute the new currency to long lines of customers, AP reported from Podgorica. The government recently promoted the slogan: "The Euro -- Our Money" to help familiarize citizens with the new coins and bills. Montenegro has used the German mark since 1999 for all transactions. For decades, the German currency functioned as the unofficial monetary unit throughout former Yugoslavia. Many people worked in Germany and saved their marks, while many more simply regarded the German currency as a refuge against the inflationary tendencies of their country's dinar (see "RFE/RL Newsline," 5 December 2001). PM

Goran Svilanovic told the Belgrade daily "Blic" on 3 January that additional indicted war criminals will be extradited to The Hague but did not say when, AP reported. "We shall definitely continue with the extraditions... All key persons whose surrender is demanded will be processed." He noted that "there is a persistent belief here that some of those who have been indicted will never appear before The Hague court. But that is a big mistake. All will answer before the tribunal. Those individuals who think that interest [abroad] in those indicted will lessen with time are simply very wrong." His remarks echo some recent ones by Djindjic (see "RFE/RL Newsline," 28 December 2001). The reference to the unnamed individuals who think "interest...will lessen" may refer to Kostunica. He regards the tribunal as an anti-Serbian instrument of U.S. foreign policy and has sought to restore international respectability to Serbia by talking and without dealing with the political legacy of Serbian nationalism. PM

The Ljubljana daily "Delo" reported on 28 December about disciplinary measures stemming from two recent incidents involving police. On 25 November, a group of seven policemen held a drunken party in offices at the Ljubljana railway station, culminating in gunfire inside the building. The following morning, a cleaning woman reported extensive damage to storage facilities. Criminal investigators subsequently discovered 14 discharged bullets in the room. This was followed by an incident on 28 November at the Loka Bar, near the railway station, where a group of seven or eight policemen behaved in a disorderly fashion, broke glasses, and left without paying. The two incidents led to 13 disciplinary actions, including four suspensions, as well as to legal action against two waiters in the bar. In addition, two officers in the railway incident are charged with endangering public safety. Branko Slak, director of the Ljubljana police administration, has announced the replacement of the commander of the railway station police unit, and the reassignment of the chastised officers to other units. DR

Former President Alija Izetbegovic was flown to Riyadh, Saudi Arabia, on 29 December for treatment for a heart condition at the King Faisal Specialist Hospital, AP reported. The news agency added on 1 January that it will be determined shortly whether he is strong enough to undergo surgery to widen his arteries. He flew on a plane provided by the Saudi royal family. Izetbegovic has long had health problems stemming from years as a political prisoner under the communists. He remains honorary president of the Party of Democratic Action (SDA), which he helped found. In December 2001, Izetbegovic traveled to Dubai to receive its government's Islamic Personality of the Year award, which is worth over $270,000. PM

Wolfgang Petritsch, the international community's high representative in Bosnia, said in his New Year's message that "the economy will need to become more dynamic and liberal in order to develop faster and maintain sustainable growth. In the coming year, I expect yet greater progress in the economic field and further professionalization in the work of the state institutions," AP reported from Sarajevo on 31 December. He added that "only by passing the necessary laws urgently, Bosnia will be able to conclude an Association and Stabilization Agreement with the EU, [thereby] ensuring widely improved trade relations, financial assistance, and economic cooperation, [and] thus opening the door for more investment and the door to the European Union." Petritsch recalled that 2001 "saw the man [former Serbian leader Slobodan Milosevic], who unleashed the violent beast of nationalism in former Yugoslavia, stand before the judges in The Hague." PM

Bodo Hombach, who is returning to private business after serving two years as coordinator of the EU Balkan Stability Pact, told the "Frankfurter Allgemeine Zeitung" on 28 December that the EU's policies are holding the Balkan countries back from integrating into the rest of Europe (see "RFE/RL Newsline," 11 December 2001). Hombach said the EU should administratively classify the west Balkan states together with the other countries seeking admission. As it stands, he noted, Albania and the former Yugoslav republics -- except Slovenia -- are "thrown into the same pot as East Timor or 48 African countries." Hombach said that EU enlargement chief Guenter Verheugen should be responsible for the EU's policy toward the region, not foreign policy chief Chris Patten. Hombach added, however, that he is convinced that the Stability Pact is essentially sound and can be applied as a model to other troubled regions. He argued that one must deal with problems step-by-step, and make it clear to aid recipients that assistance, security, and democratization are inseparably linked. PM

More than 30 Romanian consuls were deployed on New Year's Eve at eastern and southern Schengen area border entries and at major EU airports to monitor the access of Romanian citizens in Schengen states. As of 1 January, Romanians are not required to have visas to enter Schengen states, and can travel freely provided they demonstrate to Romanian border officers that they possess at least 500 euros in cash or travelers checks or valid credit cards upon leaving the country. Romanian authorities claimed that although they had checked in December to ensure that border entry points had received the updated list of visa-exempt states, they took the action to send the observers because of concern that border officers in EU states would not be aware that the obligation was lifted for Romanian citizens. Such envoys were present at seven Greek, Austrian, German, and Italian land-border entry points, and at the international airports in Thessaloniki, Athens, Budapest, Rome, Milan, Frankfurt, Munich, Berlin, Vienna, Madrid, Barcelona, Paris, and Brussels. LB

A nationwide poll conducted on 24-28 December by the Romanian polling institute IRSOP indicates that Romanians are generally optimistic regarding the coming year. Although 92 percent of those polled said they are aware that prices will continue to rise, 32 percent anticipate a better overall economic situation and 33 percent a better financial situation for themselves. Some 32 percent said they think the economy will worsen this year, and 22 percent believe their personal finances will also get worse in 2002. The work of the government was deemed as "good" by 26 percent of the respondents, "satisfactory" by 41 percent, and "weak" by 31 percent. Only 31 percent said they would like to see a change in the government in 2002, while 61 percent believe the ruling Socialists should stay in power. LB

Nikolay Svinarov said that the reform of Bulgaria's army was successfully carried out in 2001, BTA reported on 1 January. The reform included the streamlining of the armed forces and structural reforms. The so-called Plan 2004, which must still be adopted by the Council of Ministers, foresees a reduction of the present 65,000 personnel to 45,000 in 2004. Some 800 tanks, 500 armored vehicles, 40 radar stations, and 27 naval units are to be taken out of service. Svinarov pointed out that following 11 September, it will be necessary to revise both Bulgaria's National Security Concept as well as the Military Doctrine. As a first step, the Bulgarian army envisions the formation of small, mobile units. UB

As of 1 January 2002, Bulgaria has joined the UN Security Council as a nonpermanent member, along with Cameroon, Guinea, Mexico, and Syria, UN News Center reported on 2 January. The term will end on 31 December 2002. UB

Ahmed Dogan, the leader of the ethnic Turkish Movement for Rights and Freedoms (DPS) has predicted difficulties for the current government, the daily "Dnevnik" reported on 2 January. According to Dogan, the difficulties will arise from public discontent, as the government has not yet fulfilled its electoral promises. "During its first 100 days the government did what it could do," Dogan said. He also told the daily he believes it is necessary to replace mid-level personnel of the state bureaucracy in order to conduct a more effective policy. Dogan's party is in a coalition with the National Movement Simeon II (NDSV) of Prime Minister Simeon Saxecoburggotski, but the DPS has recently established good relations with the opposition Bulgarian Socialist Party (BSP). UB


When a country sees its gross domestic product soar by over 9 percent, making its economy one of the most rapidly growing in the world, it should presumably have cause for celebration. But jubilation is the last thing most Armenians care to indulge in as they enter the 11th year of painful social and economic transformation, for the simple reason that the unprecedented upswing claimed by the government's statistics has hardly improved their plight.

The official figures are impressive indeed. They showed the Armenian economy growing at a record-high rate of 9.1 percent with 3 percent inflation from January through November this year. Exports were up 14 percent, while imports remained virtually unchanged during the same period, putting Armenia's huge current account deficit on track to fall from 14.5 percent to 11 percent of GDP in 2001. Equally important is a 13 percent rise in retail sales.

"Despite how unhappy people seem to be with the situation, there is a definite improvement here," said a Western diplomat in Yerevan. "Even if the statistics are not really entirely reliable, no one should question that there is a macroeconomic improvement going on."

Armenia's macroeconomic performance is described as encouraging by the International Monetary Fund, a key driving force behind the decade-long reforms. But IMF officials are also quick to point out what analysts and some government officials alike would agree with: the Armenian growth has so far benefited mainly the rich and widened income disparity. At least half of the population remains mired in poverty, and unemployment is still extremely high.

"There is a robust growth in Armenia, but we don't see the level of poverty declining as there is only one small class that enjoys its fruits," said Garbis Iradian, the IMF representative in Armenia.

President Robert Kocharian's chief economic adviser painted a similar picture in a recent interview with RFE/RL. Vahram Nercissiantz, who headed the World Bank office in Yerevan in the 1990s, argued that raising low living standards is seriously hampered by poor tax collection and the resulting low level of public spending.

Indeed, tax revenues are expected to make up less than 15 percent of Armenia's $2.1 billion GDP this year. This ratio is two times higher in some other ex-Soviet states like Russia and Ukraine. As a result, Armenia gets an annual budget of less than $500 million, which is nowhere near enough to meet its basic needs. Economists warn that the meager amount of public funds spent on education and health care may cost the country dearly in the years to come.

The government's tax revenues increased last year, but not enough to meet the revenue targets set by the 2001 budget. The government is now scrambling for funds to offset a shortfall in third-quarter revenues. This fact gives critics reason to assert that the growth is either not being fully taxed or is not as rapid as the authorities claim.

Hrant Bagratian, the liberal former prime minister, believes that the real growth rate is unlikely to be more than 5 percent. "It's hard to believe in the credibility of these figures," he told RFE/RL.

The more dominant view is that the bulk of the extra wealth generated by the economy ends up in the pockets of wealthy businessmen, many of them with close links to the ruling regime. Otherwise, the argument goes, the authorities would not have trouble implementing their modest budget.

The fiscal problems highlight the existence of a huge informal or shadow economy based on tax evasion. Some analysts suggest that the shadow economy may account for up to half of all economic activity.

Hidden employment is one of its by-products. Hundreds of thousands of Armenians are thought to have jobs that are not listed in the document registry of the tax authorities. This makes it difficult to gauge the real impact of the growth on people's lives.

President Kocharian has recently announced the creation over the past year of more than 40,000 new jobs -- a figure questioned by his political opponents. But even if that is true, the situation on the ground has not improved markedly, with Armenia's GDP still at 70 percent of its 1990 level.

"Such a growth -- from 8 to 9 percent -- has to continue for at least four or five more years in order to make a difference to the economy," Iradian said.

Kocharian's opponents also point to the structure of the GDP growth. With industrial output rising by just 3 percent during the 11-month period, the economy has been largely pushed up by the construction and agricultural sectors. The latter has simply recovered from last year's severe drought due to a better harvest.

Skeptics also cite the continuing lack of foreign investment in the Armenian economy. They are unlikely to exceed $100 million this year.

The figure does not include the substantial money remittances from the diaspora and Armenian nationals working abroad, mainly in Russia and the United States. The Armenian Central Bank estimates that the total amount of the private transfers has reached $300 million this year. But the real figure could be even higher.

"It's a lot of money -- hard currency generated say from Moscow or Los Angeles that's somehow getting here," one Western diplomat said. "Where it is going is not clear. Sometimes I think a lot of the wealth in this country is driving around the streets of Yerevan in $90,000 cars."

Only a small proportion of that money gets into the local banks. No wonder that most business transactions in Armenia are done in cash.

Trying to understand what really drives an economy where growth is not fueled by the banking system and capital markets is a mind-boggling task. Nor is it easy to assess its growth prospects.

The Western donors' recipe for sustained growth is the improvement of the business climate, which still leaves to be much desired in Armenia. Throughout 2001 they increasingly urged Yerevan to clamp down on endemic corruption and ensure the rule of law.

In Bagratian's view, the current authorities could have secured a double-digit growth if they had kept up the momentum in structural reforms of the health care and pension systems, taxation and licensing policies, and the energy sector. He said they should also find a way to channel the huge cash resources into the legal economy.

No less important, it appears, is peace and stability in the South Caucasus. Each of its three impoverished countries is too small a market to be attractive to large foreign investors, not including several oil multinationals developing Azerbaijan's oil reserves. The reopening of borders and the free movement of capital and goods across the region is hardly possible without the settlement of the conflicts in Nagorno-Karabakh and elsewhere in the region. The current status quo thus harms both Armenia and neighboring Georgia and Azerbaijan.

"We risk being left on the sidelines of globalization," said Eduard Aghajanov, a former government minister who now runs a private economic think tank in Yerevan. "The regional states will be of little interest to international business unless they act together."

Emil Danielyan is an RFE/RL correspondent.