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Russia Report: March 23, 2000


23 March 2000, Volume 2, Number 11
PAN-REGIONAL ISSUES: TIGHTER FINANCIAL CONTROLS TO LEAD TO DE FACTO RECENTRALIZATION...
During a meeting at the Finance Ministry on 14 March, the country's top financial officials reportedly discussed measures to tighten the center's control over regional finances, "Vedomosti" reported on 15 March. Federal Treasury head Tatyana Nesterenko said that in 2000 practically all budget monies, including revenue from regional customs offices, Defense Ministry accounts, and even the coffers of the Finance Ministries of Tatarstan and Bashkortostan, will flow through the State Treasury. Nesterenko also declared that the fiscal privileges "extorted from the Kremlin" by Tatarstan President Mintimer Shaimiev and Bashkortostan President Murtaza Rakhimov several years ago has cost the federal budget some 10 billion rubles ($350 million at today's exchange rate). The daily concluded that if this "special legal order" is introduced, "Moscow will not need to merge regions or introduce amendments into the constitution," noting that regional heads "will become docile without such administrative measures" JAC

...AS TAX MINISTRY EXTENDS ITS REACH.
Yurii Lavrenov, head of the governmental Central Consultation Service of the Tax Ministry, told Interfax-AFI on 15 March that his service intends to establish tax consultation centers in 25 to 30 regions at which enterprises and citizens could receive explanations about various questions related to tax regulations. Such centers have already been created in Chelyabinsk and Volgograd Oblasts, according to Lavrenov. In January, "Kommersant-Daily" reported that federal tax officials in Volgograd Oblast had started compiling an information register about the region's enterprises that includes data about the enterprises' activities, its directors, the number of employees, and investment projects (see "RFE/RL Russian Federation Report," 26 January 2000). According to "Vedomosti," Tax Minister Aleksandr Pochinok reportedly declared at the Finance Ministry meeting that the Russian government "has never been so close to the creation of a united financial system. We cannot lose our chance." JAC

TAX MINISTRY CALLS FOR ABOLISHING OFFSHORE ZONES.
Also on 13 March, Tax Minister Pochinok called for considering the abolition of offshores worldwide but at least within Russia, "Kommersant-Daily" reported the next day. Pochinok made specific reference to closed administrative-territorial establishments (ZATOs). According to Pochinok, "the continued existence of offshore zones is unacceptable, because it affects all developing countries, which is why we should consider abolishing them." The daily reported that he also suggested that Russia's dual taxation agreements with countries with offshore zones should be cancelled. The next day, First Deputy Finance Minister Aleksei Kudrin proposed that revenues from value-added tax be redistributed. Currently, 15 percent remains in the regions while 85 percent is forwarded to the center. Instead, he suggested that the revenues be distributed on the basis of the given region's dependence on the center for financial assistance or transfers. JAC

ARKHANGELSK: DON'T DRINK THE WATER.
Arkhangelsk Oblast occupies one of the last places in Russia in terms of quality of drinking water, "Pravda Severa" reported on 16 March. One reason may be that some local enterprises regularly dump substances such as formaldehyde and phenol into the Severnaya Dvina River, the daily said. The existing water conditioning system does not produce water of sufficient cleanliness and therefore the drinking water coming out of the pipes does not meet necessary sanitary standards. JAC

IRKUTSK: LAWMAKERS SEEK TO LIMIT GOVERNOR'S POWER.
Deputies in Irkutsk's legislative assembly recently approved in its third reading a law on the election of deputies to that body, "Vostochno-Sibirskaya pravda" reported on 16 March. In accordance with new legal norms established in federal legislation, the new law grants legislators the right to set their own date for new elections, according to the daily. Previously the governor was allowed to set the election date. JAC

OMSK: 'UNHOLY ALLIANCE' THWARTS MAYOR'S BID FOR MUNICIPAL REFORM.
RFE/RL Russian Service's "Korrespondentskii chas" reported in its 11 March edition that a bid by Omsk Mayor Valerii Roshchupkin to introduce municipal reform has failed for the time being, after that move was opposed by both his allies, the Communists, and his bitter opponent, Governor Leonid Polezhaev. Roshchupkin, who like Polezhaev was re-elected last September (see "RFE/RL Russian Federation Report," 8 September 1999), had proposed reducing subsidies for municipal services so that instead of covering only 20 percent of all costs, residents' payments would account for 40 percent. That proposal provoked an angry response from the Communists, who voted against the city's 2000 budget, while Polezhaev's administration ran a campaign warning city residents that the Mayor's Office was seeking to rob them (the oblast 2000 budget, meanwhile, foresees the region's residents footing the bill for 60 percent of the cost of public services). Roshchupkin has said he will now consult with the city's residents before seeking once more to push through the reform. According to "Korrespondentskii chas," the policy of heavily subsidizing municipal services has led to a "chronic" budget deficit and large-scale wage arrears among public services employees. JC

PSKOV: STRUGGLE FOR CONTROL OF DAILY ESCALATES.
"Korrespondentskii chas" reported in its 11 March edition that just days before the second round of the mayoral elections, the struggle to establish control over "Novosti Pskova," the leading newspaper in the city and the only one in the region that is independent, entered a new critical stage. The newspaper was founded by the city administration and city Duma, which are at loggerheads with the oblast. In a bid to ensure that "Novosti Pskova" retains its independence after the mayoral ballot, the city administration and a dozen or so of the newspaper's journalists, including chief editor Vladlen Smirnov, formed a non-commercial entity to publish the daily (see "RFE/RL Russian Federation Report," 26 January 2000). However, the remaining journalists opposed this move and requested assistance from the municipal authorities, which responded by sending interior department troops to prevent Smirnov's group from entering the editorial offices. Those troops were withdrawn one day later when the city's prosecutor-general intervened, but the two groups of journalists proved incapable of working together and for several days before the mayoral ballot, Pskov city residents had to do without their main newspaper. JC

SAKHALIN: ANOTHER MAYOR TO VIE FOR GOVERNOR'S SEAT.
Fedor Sidorenko, the mayor of Yuzhno-Sakhalinsk, told reporters on 17 March that he intends to compete in gubernatorial elections in Sakhalin Oblast scheduled for autumn 2000, Interfax-Eurasia reported. Sidorenko predicted that many candidates will vie for the seat including incumbent Governor Igor Farkhutdinov, State Duma deputy (People's Deputy) Yurii Ten, and several deputies in the oblast's legislative assembly. JAC

ST. PETERSBURG: INVESTIGATORS UNEARTH MORE DIRT ON YAKOVLEV?
The ongoing investigation into the funding of an All Russia congress in St. Petersburg last spring has reportedly unearthed more information potentially damaging to the current city administration (see "RFE/RL Russian Federation Report," 15 March 2000). According to "Segodnya" on 16 March, Federal Deputy Interior Minister Petr Latyshev told journalists in St. Petersburg on 16 March that in addition to the VMTs company, which was registered with false documents, the administration used another four firms through which to funnel funds. Asked directly whether there is any evidence of the involvement of Governor Vladimir Yakovlev, who at the time was a leader of the All Russia movement, Latyshev answered only that investigators have found documents "signed by the highest officials within the St. Petersburg administration." Yakovlev is seeking re-election in the 14 May ballot. His main contender will be Deputy Prime Minister Valentina Matvienko, who recently announced that acting President Vladimir Putin supports her candidacy. JC

SVERDLOVSK: GOVERNOR LAMENTS CAPITAL FLIGHT.
Addressing the opening session of a meeting of Interior Ministry departments in the Urals regions on 17 March, Sverdlovsk Oblast Governor Eduard Rossel said that the number one crime problem in his region is drugs. He added that region is also plagued by economic crime or the "criminal redistribution of property." He cited as one example the Kachkanarskii industrial complex where the "gentlemen, leading the factory, take about $4 million monthly outside of the oblast's borders." He said that a similar situation exists at the Serovskii metallurgical factory, which he personally visited. "This is one form of evasion of taxation which is necessary to eradicate," he concluded. JAC

TULA: SEMAGO TO RUN FOR GOVERNOR.
Citing a local newspaper, "Izvestiya" reported on 15 March that Vladimir Semago intends to run in the 2001 election for governor. Semago is a former State Duma deputy (Communist) who lost his seat in the December 1999 elections. Other contenders in next spring's ballot include Right Cause leader Boris Fedorov and Duma deputy-Aleksandr Korzhakov. JC

YAROSLAVL: SUPREME COURT TO DECIDE ZAGIDULLIN'S FATE.
The Yaroslavl Prosecutor-General has appealed to the federal Supreme Court to overturn an oblast court ruling refusing to declare invalid the results of the December 1999 elections to the State Duma in District No. 189, "Nezavisimaya gazeta" reported on 15 March. Aleksandr Tsvetkov, who lost that ballot to local entrepreneur Sergei Zagidullin, had lodged a complaint with the local court, accusing the victor of violating the federal law on elections. The 34-year-old Zagidullin allegedly gave false biographical details about himself, including that he is a native of the oblast, and partly financed his campaign with funds from his own private security company based in Yaroslavl (see "RFE/RL Russian Federation Report," 9 February 2000). JC

REGIONAL INDEX: Bread Holds Steady, While Socks Rise.
The following table shows the prices of one loaf of bread and one pair of socks in 10 regions across Russia. Prices are in rubles (today's exchange rate is 28.41 rubles/$). Also listed is the percentage change between the price of the good as reported on 4 February compared with 17 March (see "RFE/RL Russian Federation Report," 9 February 2000). JAC

Region___________Bread__ % Change_______Socks____% Change
Moscow___________5.8_____+2____________30_______+20

St. Petersburg______5.6_____+4____________28_______+40

Novosibirsk________3.8______0_____________25_______+25

Yekaterinburg_______4.3______0_____________30________0

Vladivostok________6.5______+30____________18________+20

Krasnoyarsk_______5.8_______0_____________25________+25

Samara___________5.1_______0____________22.7________+3

Kazan____________3.5_______0____________7___________0

Rostov__________5.2_______-1___________10___________0

Ufa______________5.5_______0_____________17__________+11

XS
SM
MD
LG