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Newsline - September 21, 2006


GERMAN LEADER SAYS 'NO' TO MOSCOW-BERLIN-PARIS AXIS
German Chancellor Angela Merkel has closely involved the diplomats and leaders of Estonia, Latvia, Lithuania, and Poland in preparations for her planned September 23 meeting near Paris with French President Jacques Chirac and Russia's Vladimir Putin, the "Frankfurter Allgemeine Zeitung" reported on September 21. She wants to make it clear to all that she is opposed to reviving the Moscow-Berlin-Paris "axis" that took shape under her predecessor, Gerhard Schroeder, and intends to present Baltic and Polish concerns to the Paris meeting. Latvian and Estonian diplomats have stressed to her the importance of Russia's finalizing border treaties with their countries. The daily reported that Merkel was angry that Chirac announced the summit on July 3 without consulting her, but decided to go with her own agenda rather than refuse to attend. She has long made it clear that she intends to follow the policy of her mentor, former Chancellor Helmut Kohl, of working closely with the smaller European countries, as well as with France and the other larger ones, and of strengthening the trans-Atlantic partnership. The daily noted that she telephoned U.S. President George W. Bush in connection with the Paris meeting and that Bush welcomed it as an opportunity for her to present her concerns over Iran to Chirac and Putin. Schroeder, who now heads the stockholders' oversight body for the planned Russo-German North European Gas Pipeline, brought U.S.-German relations to their lowest point since World War II through his active opposition to Washington (see "RFE/RL Newsline," May 26, July 17, August 24, and End Note, "RFE/RL Newsline," March 23, 2006). PM

ARE THERE DIVISIONS IN MOSCOW OVER SAKHALIN-2?
Kirill Androsov, who is deputy economy minister, said in Moscow on September 20 that there is "no reason" to suspend work on the Sakhalin-2 energy project with Royal Dutch Shell and Japan's Mitsui and Mitsubishi until the Russian Federal Service for the Oversight of Natural Resources (Rosprirodnadzor) or other authorities complete a new environmental study on the project, RIA Novosti reported (see "RFE/RL Newsline," September 19 and 20, 2006). But Rosprirodnadzor's Oleg Mitvol said that he is considering "opening criminal cases" against Shell for "destruction of forests" in connection with the project. He added that "and then we will look at other issues" but did not elaborate. Moscow is probably seeking to renegotiate the deal so as to give the state-run monopoly Gazprom a stake. But some commentators in the weekly newspaper "Literaturnaya gazeta" noted on September 20 that Gazprom has been engaged far too long in "energy bluffing and relying on Soviet-era assets." It needs foreign investments and especially technology to develop new and often remote fields for domestic as well as for foreign markets, but instead plans to spend billions in South America, the weekly added. PM

ALARM CONTINUES IN JAPAN, EU
The Moscow daily "Kommersant" wrote on September 20 that Japanese media rank the Kremlin's decision to block Sakhalin-2 "alongside the [earlier] liquidation of Yukos and the suspension of gas deliveries to Ukraine." The daily also noted that "Tokyo's concern about the inevitable suspension of the project is due to the fact that Japan has significant plans, based on Sakhalin-2, to convert part of its industry to using liquefied natural gas (LNG), which is environmentally cleaner than fuel oil. Japan's largest electricity company and seven other companies in the sector have already signed long-term contracts to buy around 4.7 million tons of LNG per year from Sakhalin Energy, starting in 2008, which should cover about 10 percent of Japan's needs." The paper stressed that "the Sakhalin-2 project is regarded as part of strategic efforts to reduce Japan's extremely dangerous dependence on oil supplies from the unstable Middle East. A delay in Sakhalin-2 implementation could be a palpable blow to Japan, forcing it to urgently seek alternative gas sources." The paper also mentioned that Shell's press spokesman in Russia, Maksim Shub, told the daily that "our experience of working with Gazprom shows that this company, as a rule, decides everything at the negotiating table. So we're not inclined to link what has happened to any decisions by Gazprom." In Tokyo on September 21, Mitsubishi officials demanded that Sakhalin-2 be continued without delay, news agencies reported. Germany's "Frankfurter Allgemeine Zeitung" wrote on September 20 that "foreign investors should carefully consider whether they should continue to pump money into [Russian] industries that could become of strategic importance to Putin, Inc." PM

COURT FINES JAPANESE FISHING CAPTAIN
A court in Yuzhno-Kurilsk fined Japanese fishing boat captain Noboru Sakashita $9,345 on September 21 for intruding into Russian territorial waters and poaching in an incident on August 16, the Japanese international broadcaster NHK reported (see "RFE/RL Newsline," August 22, and September 1 and 22, 2006). The court confiscated his ship and assessed him for $246,000 in "damages to Russia's marine resources" but did not sentence Sakashita. He will be released once the money is paid and provided that the prosecutors do not file an appeal within 10 days. In Tokyo, Japanese officials called the ruling "unacceptable" and demanded the early release of the captain and his ship. The incident, in which one Japanese sailor was killed, took place at the height of crab season in disputed waters where the Japanese are accustomed to fish. The incident was widely seen in Japan as part of a ham-fisted attempt to show that Russia has no intention of compromising on territorial issues with Japan even though it needs Japanese investments to develop the Far East. The fishing-boat incident provided a backdrop for the Japanese reaction to the Kremlin's recent decision to block the Sakhkalin-2 project. PM

IS AMERICA AGAIN THE ENEMY?
The Defense Ministry has denied recent reports in the Moscow daily "Gazeta" and on lenta.ru that it is preparing a new official doctrine in which the United States and NATO are allegedly placed on a level with terrorists as threats to Russian security, "Gazeta" reported on September 20. Ministry spokesman Colonel Vyacheslav Sedov said that "there have been media reports about that before, but now, as on previous occasions, they're still a long way from the truth." The ministry's previous comprehensive defense doctrines date from 1993 and 2000. The daily suggested nonetheless that the ministry is trying to "hide something" from the public about defense plans. Elsewhere, on September 21 news.ru and "Nezavisimaya gazeta" reported on an alleged "secret report" to the State Duma prepared by a group of experts around former point man for Germany and CPSU Secretary Valentin Falin and former top foreign intelligence official Gennady Evstafiev. The alleged study says that Washington is seeking to promote an "Orange Revolution" in Russia by subtle and indirect means. PM

PULKOVO WARNED IT IS HEADING FOR EU'S BLACKLIST
The EU has informed St. Petersburg-based Pulkovo Airlines, which is one of Russia's largest, that on October 4 it might become the first Russian carrier to be placed on the EU's blacklist of airlines that are not allowed to fly to member states for safety reasons, news.ru and "Novye izvestia" reported on September 20. The blacklist of carriers, known as "flying coffins," was launched in March and includes at least 92 airlines, most of which are based in Africa (see http://ec.europa.eu/transport/air/safety/flywell_en.htm). An EU ban could bankrupt Pulkovo, and one Russian expert told "Novye izvestia" that he suspects that Brussels is trying to get rid of a competitor on the St. Petersburg route. Another expert said that the EU's message to Pulkovo, which has received 20 warnings from Brussels over the past year, is a sign that the airline must do more to overhaul its fleet. A Pulkovo plane crashed in Ukraine in August with the loss of a least 170 lives (see "RFE/RL Newsline," August 23, 24, and 31, 2006). PM

PRESIDENT SAYS REDUCING POVERTY IS HIS GREATEST SUCCESS
Political analyst Nikolai Zlobin told the daily "Novaya gazeta" of September 18-20 that President Putin said recently at Novo Ogaryovo near Moscow that his greatest accomplishment since becoming president in 2000 is that only 20 percent of Russian citizens now live below the poverty level instead of 40 percent before (see "RFE/RL Newsline," September 11, 2006). Putin added that the overall standard of living has risen and that he is "proud" to have paid off the foreign debt. The president noted, however, that poverty, crime, and corruption still remain problematic. He said that he will advise his successor to promote a multiparty system, "improve" relations with the regions, and develop local government. Zlobin said that he has known "three Putins." The first, after Beslan [in 2004], "was subdued and at a loss." The second, in 2005, "controls everything in Russia, and if there's anything he doesn't control, he's capable of taking control of it.... He openly despises the elite." Zlobin's "third Putin," whom he sees now, "is clearly thinking about what has happened during his period in office." On September 21, the respected Levada Center released to Interfax the results of its latest poll, in which 77 percent of respondents approve of Putin's performance in office and 22 percent disapprove. About 45 percent rate him as Russia's best politician, followed by Emergency Situations Minister Sergei Shoigu at 19 percent. PM

LIBERALS PLAN TO WIN -- IN 2015
The leader of Russia's Union of Rightist Forces (SPS), Nikita Belykh, told journalists on September 19 in Moscow at the party's convention that "we are interested in renewing this political party as much as possible from the point of view of its political program," RFE/RL's Russian Service reported. He added that "we are proposing a new political program that preserves all of our liberal and democratic values. I think it is an improvement in that it has been updated to respond to today's questions and problems." He also announced that the party is determined to win in 2015, saying that "we're perfectly well aware that we won't be able to become the ruling party in 2007. Therefore, our goal for 2007 is to make it into the [State] Duma. Our goal for 2011 is to strengthen our Duma faction. Our goal for 2015 is to become the ruling party." Sergei Ivanenko, first deputy chairman of the Yabloko party, was a guest and told the convention that "the very existence of a party which is not in power at present, and continues to uphold unpopular slogans, is, in my view, an act of civic courage," "Nezavisimaya gazeta" reported on September 20. PM

ARMENIAN OPPOSITION LEADER RESIGNS
After a bitter internal dispute within his party, Armenian opposition leader Hrant Khachatrian announced on September 20 his resignation as the leader of the opposition Union for Constitutional Rights (SIM), RFE/RL's Armenian Service reported. The resignation follows an open clash between Khachatrian and his longtime deputy Hayk Babukhanian during a recent party congress where Babukhanian was accused of "weakening the party" and committing "serious financial irregularities" in his capacity as editor in chief of "Iravunk," one of the most popular dailies. Despite his resignation as party leader, Khachatrian vowed that he will retain the party's one seat in parliament. The SIM, one of Armenia's oldest opposition parties, is one of nine parties aligned in the opposition Artarutiun (Justice) bloc. RG

ARMENIAN DEFENSE MINISTER MEETS WITH VISITING U.S. MILITARY DELEGATION
Serzh Sarkisian met on September 20 in Yerevan with a visiting U.S. military delegation led by Lieutenant General William Ward, the deputy commander of U.S. European Command (EUCOM), according to RFE/RL's Armenian Service. Sarkisian discussed plans to increase military cooperation with the United States and reviewed "Armenia's participation in international stabilization initiatives," including the deployment of peacekeepers to Kosova and Iraq. The U.S. military delegation arrived in Armenia from Georgia, where it concluded a new agreement providing that country with some $40 million in military assistance. RG

ARMENIAN PREMIER COMMENTS ON POSSIBLE PRICE RISE BY TELEPHONE MONOPOLY
Prime Minister Andranik Markarian said on September 20 that he opposes an attempt by the ArmenTel national telecommunications operator to introduce a steep price rise for fixed-line telephone connections, RFE/RL's Armenian Service reported. ArmenTel, which holds a legal monopoly on phone services, submitted a formal request to state regulators, who have the exclusive authority to set utility tariffs. Its parent company, the Hellenic Telecommunications Organization (OTE), is reportedly moving ahead with the planned sale of its 90 percent stake in ArmenTel and has recently shortlisted four foreign suitors, including the owners of Russia's two largest mobile-phone operators. The Public Service Regulatory Commission, a state body that is formally independent of the government, is expected to rule on the ArmenTel application by October 15. It held its first hearing on the proposed price rise on September 19, with testimony from ArmenTel representatives, politicians, and consumer-rights groups. RG

OSCE WELCOMES NEW REFORMS OF FREEDOM-OF-ASSEMBLY LAW IN AZERBAIJAN
Speaking at a press conference in Baku on September 20, Ambassador Maurizio Paveis, the head of the Organization for Security and Cooperation in Europe (OSCE) office in the Azerbaijani capital, said that there are problems with staging demonstrations in Azerbaijan and welcomed the recent decision to form a working group to modify the current laws on freedom of assembly, Turan reported. The new working group is to be made up of representatives of the Azerbaijani government, the Baku OSCE office, the OSCE headquarters, and the Venice Commission, as well as including international and local experts. Pavesi characterized the timing of the process as beginning at "the right moment" and noted the need to reform legislation to conform with the obligations of Azerbaijan's ratification of the European Human Rights Convention. Chingiz Askerov, an official in the office of the presidential administration, added that Azerbaijan requested technical expertise and assistance from the Venice Commission in April and admitted the need to improve the current law on freedom of assembly, which he said has "shortcomings" in the "application and wording of the law." RG

EXPLOSION KILLS AT LEAST 32 KAZAKH MINERS
An explosion deep inside a Kazakh mine on September 20 left at least 32 miners dead and left others missing, "Kazakhstan Today" and Interfax reported the same day. The Kazakh Emergency Situations Agency increased that death count to at least 40 the following day and added that seven miners have been hospitalized after being pulled out alive, RFE/RL reported. The explosion is believed to have been caused by a buildup of methane gas in the mine, which is in Kazakhstan's central region of Qaraghanda and is owned by a subsidiary of the world's largest steel producer, Mittal Steel. Regional prosecutors announced the opening of a criminal investigation into the explosion, and mine officials from subsidiary Mittal Steel Termitau are said to be actively cooperating with the official investigation. The company was criticized in September by Dos Koshim, who heads a local nongovernmental Network of Independent Observers, for failing to ensure the safety of miners. Koshim blamed "negligence and the search for profit on behalf of foreign investors and local authorities" for the disaster. RG

KAZAKH PRESIDENT APPOINTS NEW HEALTH MINISTER AND REGIONAL GOVERNOR...
Addressing a meeting of the Kazakh National Security Council meeting in Astana, President Nursultan Nazarbaev announced on September 20 the dismissal of Health Minister Yerbolat Dosev for "negligence" in handling an HIV outbreak in the south of the country, "Kazakhstan Today" and Kazinform reported. The outbreak is believed to have been caused by the use of tainted syringes or contaminated blood. Fifty-five children and one adult have tested positive for HIV and at least four infants have died of AIDS since early May. Nazarbaev named Anatoly Dernovoi the new health minister and replaced the governor of the afflicted region, Bolat Jylkyshiev, with Astana Mayor Umirzak Shukeev. The president also ordered his government to draft a new national anti-AIDS program within 90 days. Figures released on September 14 by the State Statistics Agency revealed that there were nearly 6,500 HIV-carriers and 400 people afflicted with AIDS in Kazakhstan as of mid-2006. RG

...AND FIRES NATIONAL TELECOM EXECUTIVE
President Nazarbaev ordered Prime Minister Daniyal Akhmetov on September 20 to fire Khayrat Karibzhanov, the head of the national telecommunications company, Kazakhtelecom, , Interfax reported. The order, issued during a meeting of the National Security Council in Astana, was announced by Khabar television as part of a broader effort to address allegations of corruption and mismanagement in state bodies. RG

KYRGYZ PRESIDENT VOWS TO 'ELIMINATE' ISLAMIC MILITANTS
Speaking to a meeting of Kyrgyz security officials in Bishkek, President Kurmanbek Bakiev on September 20 praised recent security operations that included the killing and arrest of a number of alleged Islamic militants in southern parts of the country as "perfectly right," RFE/RL's Kyrgyz Service reported. Bakiev stressed that Islamic extremism poses a serious threat to national security and urged security officials to "eliminate" militants whom he accused of seeking to destabilize the country. RG

MINSK PROTESTS 'DELIBERATE ABDUCTION' OF ORPHAN BY ITALIAN COUPLE
Belarusian Foreign Minister Syarhey Martynau on September 20 summoned Italian Ambassador Guglielmo Ardizzone to hand him a note of protest against "the deliberate abduction" of a 10-year-old Belarusian orphan by an Italian couple, Belapan and Reuters reported. The note calls for a prompt investigation and the immediate return of the girl, who has been given the pseudonym "Maria," to Belarus. The girl spent a summer holiday with an Italian couple, Maria Bornacin and Alessandro Giusto, near Genoa under a program devised for children suffering long-term consequences of the Chornobyl disaster. The Italian couple refused to send the girl back to Belarus, saying they discovered that she had been sexually abused in her orphanage. After a court in Genoa ordered them to send Maria back, they hid the girl. "Deciding to hide her to avoid her being repatriated was an act of desperation, but I would do it again," Bornacin told an Italian magazine. The couple wants to adopt Maria legally. JM

UKRAINIAN PREMIER VOWS PUSH TOWARD EU
Viktor Yanukovych declared in Brussels on September 21 that the fight against corruption and economic reform will be Ukraine's top priorities as the country seeks to get closer to EU membership, AP reported. Yanukovych also said Ukraine will push for World Trade Organization membership and the creation of a free-trade area with the EU. "We are...aware that most of the effort must be made on the part of Ukraine in order to have this approximation to the EU," Yanukoych said after a meeting with European Parliament President Josep Borrell. JM

UKRAINIAN PARLIAMENT STARTS DEBATE ON 2007 BUDGET
The Verkhovna Rada on September 21 began a debate on a 2007 draft budget approved by the Cabinet of Ministers last week, Ukrainian media reported. The document sets consolidated budget revenues in 2007 at $180 billion hryvnyas ($60 billion) and spending at $186 billion hryvnyas. The draft budget projects economic growth in 2007 at 6.5 percent of gross domestic project (GDP). JM

KOSOVAR PREMIER SAYS SERBIA WOULDN'T DARE INVADE...
Agim Ceku said on September 20 that Serbia would never dare invade the breakaway province again, AP reported the same day. In an exclusive interview with AP, Ceku said that after the bloodshed of the 1990s, Serbs know enough "not to invade Kosova again." He added, "They have no courage." Ceku also assailed Serbian nationalists for using "primitive propaganda" to incite ethnic tensions as the United Nations nears a decision on Kosova's final status. "War is past. I'm sure there's no willingness to choose this way of realizing their wishes," Ceku said. "That is all mythology. There's a huge lack of reality in Serbia." BW

...CRITICIZES BELGRADE FOR CAMPAIGN AGAINST UN ENVOY
In the same AP interview on September 20, Ceku accused the Serbian government of waging a campaign to discredit UN envoy Martti Ahtisaari. Ceku said Belgrade is seeking to delay the final-status process, divide the international community, and destabilize Kosova. Ahtisaari sparked fierce criticism from Serbia when he said the legacy of the Slobodan Milosevic era is relevant in determining Kosova's future (see "RFE/RL Newsline," August 28, 29, and 30, 2006). As a result of Belgrade's actions, Ceku said, Kosova's Serbs "are very confused and very worried. This feeling has been imposed by Belgrade." Ceku also urged Serbs not to leave Kosova, as approximately 200,000 have done since Serbian forces were driven out in 1999. "I have encouraged Kosova's Serbs not to leave, not to be discouraged," Ceku said. "Independence is the time to stay, not leave. Independence is the time to come back." BW

UN CONDEMNS BOMBING IN KOSOVA...
The United Nations pledged on September 20 to thoroughly investigate an attack that injured four ethnic Serbs, AP reported the same day. The explosion outside an apartment building late on September 19 in Klina, about 60 kilometers west of Pristina, was the fourth bombing in five days. "We condemn this act of violence directed at innocent people," said a statement from the deputy head of the UN administration in Kosova, Steve Schook. "Violence cannot be a means to achieve an end. It serves no purpose and it certainly is not in the interest of Kosovo." BW

...AS DO BELGRADE AND PRISHTINA
Serbian Prime Minister Vojislav Kostunica bitterly deplored the bombing in comments to the state-run Tanjug news agency, AP reported the same day. "It is absolutely unacceptable that Serbs are being targeted and that [ethnic] Albanian separatists openly threaten the international community with violence and blackmail," he said "Unless the international community stops the violence immediately, it becomes an accomplice in the crimes against Serbs." Kosova's leaders also denounced the attack. "The Kosovo government strongly denounces the criminal attack against four Klina citizens of the Serb community... The act aims at compromising Kosovo's coexistence," AP quoted a statement from Prime Minister Ceku, who visited the injured after the attack, as saying. BW

UN WARNS KOSOVAR LEADERS TO WATCH THEIR LANGUAGE
The United Nations on September 20 told Kosova's leaders to be more careful with their statements after parliament speaker Kole Berisha warned of a revolt if the province is denied independence, Reuters reported the same day. "I hope the leaders of the government, unity [negotiating] team, and local leaders are very careful with the phrases they use and the messages they direct to public opinion and the people right now," UN deputy administration head Schook told reporters after meeting Berisha on September 20. Speaking in Slovenia on September 18, Berisha warned: "If our aim of independence is not realized, then citizens' revolts are expected in Kosova. We don't want revolts, but we cannot exclude them if our aim is not realized." He repeated the comments after returning to Kosova the next day. BW

COUNCIL OF EUROPE DRAFT RESOLUTION FAVORS KOSOVA INDEPENDENCE
The Council of Europe has drafted a resolution calling independence the best solution for Kosova, B92 and Beta reported on September 20. The Political Committee of the Council of Europe's Parliamentary Assembly adopted the resolution on September 18. "The assembly, while respecting Serbia's interests and her right to preserve her territorial integrity, believes that Kosovo's independence, with certain conditions, would be a solution that not only corresponds with the will of the majority of Kosovo citizens, but also provides a best chance for a lasting, long-term peace and stability in the region," the resolution said. It adds that Kosova's unresolved status jeopardizes political stability in the western Balkans. It also says that regardless of the final-status decision, the Council of Europe is prepared to assist both Serbia and Kosova in the future. BW

SERBIAN, U.S. PRESIDENTS MEET AT UN
On the sidelines of the UN General Assembly session on September 19, Boris Tadic told U.S. President George W. Bush that a democratic Serbia can be a stabilizing factor in the Balkans, B92 and FoNet reported the next day. The two presidents met twice, at a roundtable on democracy organized by Bush, and later during a working lunch organized by UN Secretary-General Kofi Annan. Tadic told Bush that Serbia is determined to be a stability factor in the region. "Only a democratic Serbia can play that role," he said. Bush said he is aware of talks Tadic had with U.S. officials on his September 6-8 visit to Washington. "I have understood your message," Bush said. BW

AZERBAIJANI HYDROCARBON BOOM SPARKS FEARS OF 'DUTCH DISEASE'
Twelve years ago, against a background of euphoric predictions of booming national wealth, Azerbaijan signed its first major oil contract with a Western company. But 12 years later, alarm bells are sounding that energy-rich Azerbaijan may be falling victim to "Dutch disease," a term coined to describe the decline of the manufacturing sector in the Netherlands in the 1960s after the discovery of natural gas in its waters.

What could possibly be wrong? With oil now pouring through the multibillion-dollar Baku-Tbilisi-Ceyhan pipeline and the Baku-Tbilisi-Erzerum gas pipeline just weeks from inauguration, Azerbaijan stands on the brink of colossal wealth.

President Ilham Aliyev says he expects the pipelines to generate $140 billion over the course of the next 20 years. Even if energy prices do fall from their present dizzying heights, few would contest the figures.

Yet this week, the International Monetary Fund (IMF) issued a distinctly downbeat appraisal of the country's economic performance. Vitali Kramarenko, a senior economist in its Middle East and Central Asia Department, warned that the economy was in danger of overheating. "The problem is that the government is increasing expenditure at exceptionally high rates. For the first half of 2006, expenditure increased by more than 70 percent in nominal terms compared with the first half of 2005. This causes overheating because the supply side of the economy cannot respond to the increased demand," Kramarenko said.

And that in turn is driving inflation. "The inflation rate predictably increased from about 5.5 percent in December 2005 to about 10.2 percent in August 2006 and our forecast is that the inflation rate will continue to climb," Kramarenko added.

Inglab Akhmadov of Azerbaijan's independent Public Finances Monitoring Center agrees. He believes the oil wealth is inducing a dangerous sense of complacency -- and providing fertile ground for the further spread of corruption. He questions whether the boom has provided any jobs outside the energy sector and warns that Azerbaijan stands on the brink of Dutch disease.

"We are at the beginning of Dutch disease's negative impact on Azerbaijan's economy because we observe trends in our national currency. We're observing a very big inflation process in Azerbaijan," Akhmadov says. "And we observe a lot of problems in the non-oil sector and business climate for all other sectors in Azerbaijan. It means we have all of the classical attributes of Dutch disease, but unfortunately it is just the beginning of this process."

Dutch disease is something Laurent Rusekas, a leading expert on Caspian Sea economies, knows all about. Fail to keep it under control, fail to use the oil to spread wealth evenly throughout the economy, and Azerbaijan's dreams of economic transformation could turn into nightmares.

"The Dutch disease refers to a situation when all of a sudden a country begins exporting a huge amount of natural resources relative to the size of its economy. This produces pressure on the currency. If you don't take steps to combat this, as oil exports start to boom your currency, in this case the manat, will rise against the dollar," Rusekas says. "If that happens, anything else that anyone else in your country is hoping to export becomes uncompetitive and all of your imports all of a sudden become twice as expensive in dollar terms. The only thing that the country can possibly export is the natural resource that led to the problem to begin with."

The government of Azerbaijan is playing down the problem. It is hardly surprising, it says, that it is facing these problems now as the revenues from oil and gas start to boom.

But Azerbaijan's is not a one-branch economy, it insists, and it is taking measures to ensure transparency in the energy sector and to ease the threat of inflation. It cites, for instance, the creation of the State Oil Fund (SOFAR) in 2001, which puts aside a share of the energy profits for long-term investment in public infrastructure and social-welfare projects.

Akhmadov welcomes SOFAR, whose coffers now contain around $1.6 billion, but complains of a lack of public accountability -- a problem that he says is symptomatic of the government's handling of the entire economy. "This is a very big challenge for the government to demonstrate transparency of its activities and transparency of vision of the situation and to insure some relevant infrastructure in society, especially to ensure some control of government -- both domestic control and of course extra control from other governments' bodies and especially from civil society of these very big investment projects," Akhmadov says.

For the moment, though, Akhmadov says he sees no sign of this happening. He's not alone. The IMF is also calling for better governance and measures to improve the business climate, but Kramarenko says he is optimistic that Azerbaijan is still well-placed to benefit from its natural resources. The key, though, to future prosperity, he says, is to increase productivity now in the non-energy sector.

"To solve this problem one needs to increase the productivity of domestic producers so as to make it possible for them to withstand greater competition," Kramarenko says. "But also, one might think whether the speed of spending should be adjusted because it is the source of real exchange-rate appreciation and by reducing a little bit the speed of increase in spending the government could make it easier for local producers to adjust."

Easier said than done, of course. And at a time when so many in Azerbaijan are still hell-bent on cashing in on the oil boom perhaps a bit like whistling in the wind.

(Robert Parsons is an RFE/RL correspondent based in Prague.)

AFGHAN PRESIDENT URGES WORLD COMMUNITY TO 'DESTROY TERRORIST SANCTUARIES'...
Afghan President Hamid Karzai urged the UN General Assembly in an address on September 21 to destroy terrorist harbors outside Afghanistan, AP reported. He said "military action in Afghanistan alone" -- where a U.S.-led coalition is battling guerrilla fighters -- "will not deliver our shared goal of eliminating terrorism," according to RFE/RL. Karzai warned that terrorism is "rebounding" in his country and said Afghanistan is the "worst victim" of terrorist acts. "We must destroy terrorist sanctuaries beyond Afghanistan, dismantle the elaborate networks in the region," Karzai told UN representatives in New York. "We must ensure that political currents and entities in the region are not allowed to use extremism as an instrument of policy." Afghanistan has repeatedly accused Pakistan of doing too little to act against neo-Taliban insurgents based in Pakistan. MR

...WHILE PAKISTAN'S LEADER BLAMES KABUL FOR INSURGENCY PROBLEM
Pakistani President Pervez Musharraf told the UN General Assembly on September 20 that Afghanistan is to blame for the ongoing violence within its borders, AFP reported. Musharraf claimed President Karzai lacks understanding of the "new" militancy in the region, which he said has "shifted focus from the Al-Qaeda to Taliban." "Instead of this blame game that goes on, they must realize what is the environment," Musharraf said, adding, "The problem lies in Afghanistan.... They don't know the environment. What President Karzai has said is not the correct things." Tensions between Pakistan and Afghanistan remain high as insurgent violence continues to rock Afghanistan. Musharraf and Karzai are expected to participate in a joint meeting with President George W. Bush in Washington on September 27. MR

NATO COMMANDER CLAIMS 1,000 NEO-TALIBAN KILLED, BUT STILL 'LOSING GROUND' IN AFGHANISTAN
The top NATO commander in Afghanistan said on September 30 that coalition forces have killed more than 1,000 neo-Taliban insurgents in recent fighting, AFP reported. But General James Jones also warned that drug trafficking in Afghanistan undercuts coalition victories. "As a matter of fact, we're not making progress, we're losing ground," Jones said. "And that has to be reversed, because it affects the entire fabric, social structure, economic structure, and it supports the insurgency." Jones predicted a resurgence of neo-Taliban forces, despite major coalition military operations in southern Afghanistan. "It remains to be seen how much more capacity they have for this kind of fight," Jones said. "I think they will look for other areas," he cautioned. MR

KARZAI NOMINATES FORMER AFGHAN FINANCE MINISTER FOR TOP UN POST
President Karzai on September 20 nominated former Afghan Finance Minister Ashraf Ghani for the top UN job when Kofi Annan's term expires at the end of this year, AP reported. Ghani is currently the chancellor of Kabul University. He was Afghanistan's finance minister from 2002-04, and previously worked for the World Bank in Asia. "The government of Afghanistan believes that Ashraf Ghani is uniquely equipped to lead the United Nations at [a] time when imagination and leadership are required in both security and development," a statement released by Karzai's office said. "As someone who stands at the intersection of Islam and the West, he has the capacity to bring the world together at a time of growing religious and geopolitical tension." The statement added, "The president requests members of the United Nations to support Dr. Ghani's nomination to become the next secretary-general." MR

IRAN BANS PRESENCE OF U.S. REPORTERS
Iran's Islamic Culture and Guidance Ministry announced on September 20 that U.S. reporters will not be allowed to work in Iran, state television reported. The move reportedly came in response to Washington's alleged refusal to issue visas for all the reporters wishing to accompany President Mahmud Ahmadinejad during his visit to the United States to address the UN General Assembly. BS

IRANIAN SECURITY OFFICIAL VISITS DAMASCUS
Supreme National Security Council Secretary Ali Larijani arrived in Damascus on September 20 for a one-day visit, SANA reported. Larijani met with Syrian President Bashar al-Assad and Vice President Faruq al-Shar'a, and topics of discussion reportedly included the international standoff over the Iranian nuclear program, Iraq, Lebanon, and Palestine. BS

IRANIAN CLERIC CHALLENGES POPE TO DEBATE
Grand Ayatollah Nasser Makarem-Shirazi on September 20 invited Pope Benedict XVI to a debate at any time or place, Fars News Agency reported. "The hostile remarks made by the pope are a clear example of the growing violence in the world," Makarem-Shirazi said. He was responding to a September 15 speech by the Roman Catholic pontiff in which he quoted 14th-century Byzantine Emperor Manuel II Paleologus's assertion that Islam brought the world only "evil and inhuman" things, such as "the command to spread by the sword the faith he preached." The pope has been sharply criticized by many Islamic leaders as a result of the speech. Iranian Supreme Leader Ayatollah Ali Khamenei criticized the pope in a September 18 speech, state radio reported. Such comments result from ignorance and are insulting, Khamenei said. Khamenei said these statements are part of an effort to create crises and misrepresent Muslims. "I think the pope himself has been deceived in this case," Khamenei added. The Vatican issued several statements expressing "regret" that Muslims found the speech offensive, and Pope Benedict on September 20 stressed his "deep respect" for Islam and said the "polemical nature" of the 14th-century emperor's statement "does not reflect my personal conviction." BS

IRANIAN MAN ARRESTED FOR PROTESTING DEATHS OF POLITICAL PRISONERS
Fazael Azizan was detained by Iranian authorities on September 18, Radio Farda reported on September 20. Azizan was protesting outside the Ardabil provincial governorate against the mysterious deaths of political prisoners Akbar Mohammadi and Valiollah Feyz-Mahdavi. Talash Kobra Ghorbanzadeh, Azizan's wife, told Radio Farda that her husband is in solitary confinement and has launched a hunger strike. Ghorbanzadeh said she was taken to see a prosecutor who asked about Azizan's associates and wanted to know who was behind his protest. Ghorbanzadeh reportedly responded that Azizan acted of his own accord but said the judge was not convinced. If Ghorbanzadeh does not cooperate, she said the prosecutor warned, her husband could be subjected to harsh measures. BS

IRAQI SECURITY FORCES ASSUME CONTROL OVER SECURITY IN SOUTHERN GOVERNORATE
Iraqi security forces assumed control over security for the Dhi Qar Governorate in a September 21 ceremony broadcast live on Al-Iraqiyah television. Prime Minister Nuri al-Maliki attended the ceremony, thanking Italian Defense Minister Arturo Parisi for the role Italian forces have played in the governorate. Italian troops have been stationed in Iraq since 2003; the 1,600-strong force is expected to withdraw completely by year-end. Parisi also spoke at the ceremony, telling guests that the Italian mission was accomplished. Dhi Qar is the second governorate where Iraqis have assumed control over security; British forces transferred responsibility for Al-Muthanna Governorate in July (see "RFE/RL Newsline," July 13, 2006). KR

UN REPORTS 6,600 IRAQIS KILLED IN JULY AND AUGUST
The UN Assistance Mission for Iraq (UNAMI) said in a September 20 report that some 3,590 Iraqi civilians were killed in July, bringing the total number of those reported killed in July and August to 6,600, the mission said in a same-day press release posted on its website. The majority of the victims were killed in Baghdad. UNAMI said a lack of centralized control over the use of force is a cause for terrorist attacks, the increase in militias, and the emergence of organized crime. The report also cited the extrajudicial killings of former regime members, including former members of the armed forces. It said ordinary citizens continue to be victims of sectarian-based intimidation, threats, and kidnappings, particularly women. UNAMI noted continued reports of detainee maltreatment by U.S.-led multinational forces in Iraq, and torture by Sunni and Shi'ite militias. "Bodies found at the Medico-legal Institute often bear signs of severe torture," the study said, including acid burns, broken bones, missing skin, eyes, and teeth, and wounds caused by power drills. Detainees' bodies bore signs of beating by electrical cables, head and genital wounds, broken legs and hands, and electric and cigarette burns. KR

KURDISH MINISTER DISCUSSES OIL DEVELOPMENT IN NORTHERN IRAQ
Ashti Hawrami, minister of natural resources in the Kurdish autonomous region's government, told an audience in London on September 20 that the regional government intends to have exclusive control over the development of its oil fields, Reuters reported the same day. "Control of the new fields is the exclusive right of the regions and we are not going to budge on that. We will control them 100 percent," he said. Hawrami added that the region intends to share oil revenues with Baghdad. "We have no intention of withholding revenue from the central government," he said. "We will not take a dollar extra than our fair share, but we expect our fair share." The Kurdish region's government recently drafted a petroleum law for the region, and expects an increase in international investment in the region's petroleum development in the coming months (see "RFE/RL Newsline," September 15, 2006). KR

JORDAN SENTENCES WOULD-BE IRAQI SUICIDE BOMBER TO DEATH
A Jordanian state security court has sentenced would-be suicide bomber and Iraqi national Sajida al-Rishawi to death by hanging for her role in the triple hotel bombings in Amman in November 2005 that left 60 dead, Jordanian media reported on September 21. Six others were sentenced in absentia; all of those sentenced are reportedly affiliated with Al-Qaeda in Iraq. Al-Rishawi's husband blew himself up in the attack on the Radisson SAS Hotel. Al-Rishawi said in a taped confession that she intended to blow herself up in the same incident, but her belt failed to detonate. Al-Rishawi can appeal the sentence under Jordanian law. KR

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