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Newsline - July 3, 1997


At a 2 July meeting with Prime Minister Viktor Chernomyrdin, President Boris Yeltsin instructed the government to pay its debts to the armed forces within two months and all wage arrears to teachers, doctors, and other state employees within three months, Russian news agencies reported. Persistent wage arrears have prompted teachers, doctors, and communications workers to stage strikes in many regions. First Deputy Finance Minister Aleksei Kudrin estimated in May that wage arrears in Russia total 53.7 trillion rubles ($9.3 billion), ITAR-TASS reported on 16 May. Of that sum, he said, 11.2 trillion rubles are owed to workers by federal, regional, or local governments and the rest by non-state enterprises. Kudrin also said in May that the federal government would pay all its wage arrears to state employees by the end of July.


Sergei Stepashin, a former director of the Federal Security Service, announced that as justice minister he will help bring Russian laws and legal procedures in line with European norms to comply with the country's obligations as a member of the Council of Europe, Russian news agencies reported on 2 July. However, he said this process could take between 10 to15 years. Stepashin also said he has already met with First Deputy Prime Minister and Finance Minister Anatolii Chubais to discuss financing for the Justice Ministry and court system. Chubais promised to do "all that is necessary" to provide the judicial branch with sufficient funds, Stepashin added. Supreme Court Chairman Vyacheslav Lebedev announced on 1 July that dozens of courts across Russia have been forced to suspend their activities for lack of funding from the federal government, ITAR-TASS reported.


Yeltsin promised to support Kemerovo Oblast Governor Aman Tuleev during a 2 July meeting with the new governor, Russian news agencies reported. The same day, chairing a meeting of the interdepartmental government commission on social and economic problems of coal mining regions, First Deputy Prime Minister Anatolii Chubais said the government will allocate 300 billion rubles ($52 million) to the coal industry by 15 July. But he asked Tuleev to investigate the possible misuse of 180 billion rubles transferred to Kemerovo last year as part of a World Bank loan: "First the names and the punishment [of those responsible], then financial support from the center." Tuleev's press service called on Kemerovo trade unions not to go ahead with an oblast-wide strike planned for 11 July. Meanwhile, Yeltsin appointed former Kemerovo Governor Mikhail Kislyuk to head the Federal Service for Regulation of Natural Transportation Monopolies.


Neither First Deputy Prime Minister Chubais nor the government's press service has issued a statement on new accusations against Chubais published in "Izvestiya" on 1 July. The paper claimed, among other things, that the Center for the Protection of Private Property, founded by Chubais in early 1996, received an allegedly suspicious loan from Stolichnyi Bank (see "RFE/RL Newsline," 2 July 1997). Citing the U.S. journal "Demokratizatsiya," "Izvestiya" also said that the Russian Center for Privatization, which Chubais had long coordinated, received more than $100 million in recent years from international financial organizations. But a 2 July press conference held by that center's director-general, Viktor Pankrashchenko, was attended by only 15 or so journalists, none of them from television networks, RFE/RL's Moscow bureau reported. Pankrashchenko discussed his center's 1996 achievements and 1997 projects but declined to comment on the "Izvestiya" article.


The formerly pro-government "Izvestiya" followed up its unprecedented attack on Chubais with a 2 July article by the same authors criticizing Menatep bank and its alleged government patrons, such as Central Bank Chairman Sergei Dubinin. Some analysts believe the new editorial line of "Izvestiya" is related to the recent election of Oneksimbank deputy chairman Mikhail Kozhokin as chairman of the newspaper's board of directors. In a 2 July interview with RFE/RL's Moscow bureau, Sergei Markov, senior associate of the Carnegie Moscow Center, suggested that Oneksimbank President Vladimir Potanin has turned against the government. Markov noted that Oneksimbank lost a bid to acquire the Sibneft oil company in May and more recently failed to install the head of an Oneksimbank affiliate on the Gazprom board of directors (see "RFE/RL Newsline," 30 June 1997). Potanin was first deputy prime minister from August 1996 to March 1997.


A malfunction in the gyrodines of the space station "Mir" is complicating its ability to draw power through its solar panels, international media reported. Deputy chief of Russian Mission Control Sergei Krikalev said on 3 July that the astronauts are using the station's rocket engines to realign the station's position but that "it presents no danger for either the station or the cosmonauts as we have enough fuel." The latest theory as to why a cargo ship crashed into "Mir" is that the cargo ship was overloaded and its breaking systems did not compensate for the additional weight as it docked with "Mir." Meanwhile, the cargo ship was allowed to enter Earth's atmosphere and burn up over the Pacific Ocean on 2 July.


Meeting on 2 July with a visiting Iraqi parliamentary delegation, First Deputy Prime Minister Boris Nemtsov said the Russian leadership advocates lifting the oil embargo on Iraq, providing that Baghdad "complies with all UN resolutions." He added that Russia will raise this issue with the UN Security Council in October, ITAR-TASS reported. Federation Council Chairman Yegor Stroev similarly told journalists on 2 July after talks with his Iraqi counterpart, Saadoun Hammadi, that the "question of lifting the embargo is justified," noting that it "had caused a sharp increase in infant mortality," Interfax reported. Russian State Duma speaker Gennadii Seleznev told the Iraqi delegation the previous day that "Russia has an economic interest in restoring ties with Iraq, and Russian businessmen are prepared to work with their Iraqi colleagues."


Heidar Aliyev arrived in Moscow on 2 July on his first official visit since regaining power in Azerbaijan four years ago, Russian and Western agencies reported. Aliyev told journalists on his arrival that "Azerbaijan has good relations with Russia" and that he hoped to sign a "soundly-based" bilateral treaty on friendship and cooperation as well as 12 other agreements. Aliyev met on 2 July with Russian Prime Minister Viktor Chernomyrdin and discussed the export of Azerbaijan's Caspian oil via Russia and the legal status of the Caspian Sea. Aliyev also held talks with Moscow Mayor Yurii Luzhkov and with Foreign Minister Yevgenii Primakov.


Central Bank Chairman Sergei Dubinin has announced that as of 1 July, the Central Bank's gold and hard currency reserves had risen to $23.8 billion, compared with $15 billion at the beginning of 1997, RFE/RL's Moscow bureau reported on 2 July. He also said the Central Bank has discovered that two commercial banks authorized to handle state funds defrauded the budget of more than $400 million. Details about those banks, which he did not name, have been sent to the Procurator-General's Office for investigation, Dubinin added. Asked by RFE/RL to comment on the 2 July "Izvestiya" report saying he had used his connections to help Menatep gain permission to handle more state funds than any other bank, Dubinin avoided a direct answer, saying only, "As far as I know, in the rating of lobbyists [in the government] I come in last place."


Attending a science awards ceremony in Moscow, Prime Minister Chernomyrdin announced on 2 July that GDP grew by slightly more than 1% in the first six months of 1997, Russian news agencies reported. Chernomyrdin did not say how that figure was calculated. The State Statistics Committee announced in June that GDP for the first five months of 1997 was down 0.2% from 1996 levels. In addition, cabinet officials recently said the government had revised its 1997 economic forecasts and was predicting a GDP decline of up to 2% for the year. Also on 2 July, Central Bank head Dubinin said inflation for the first six months of 1997 was 8.4%. But the State Statistics Committee estimated inflation for the first half of the year at 8.6%, down from 15.5% inflation during the same period in 1996, Interfax reported.


The Constitutional Court has ruled that an anti-crime law in the Republic of Mordovia violates citizens' constitutional rights, ITAR-TASS reported on 2 July. The law allowed those suspected of belonging to organized criminal groups to be detained for up to 30 days without charges being brought against them. Yeltsin recently rescinded a 1994 anti-crime decree that allowed law enforcement agencies to detain some suspects for up to 30 days without filing charges (see "RFE/RL Newsline," 18 June 1997).


Also on 2 July, the Constitutional Court struck down a Moscow Oblast law requiring new residents to pay a fee equivalent to 300 monthly minimum wages (more than 22.5 million rubles or $3,900) in order to receive a residence permit for the oblast, ITAR-TASS reported. The court found that the law violates citizens' constitutional right to live anywhere in the Russian Federation. Judges also said the law contradicts the constitution by imposing a regional tax not provided for by federal legislation. According to the weekly "Itogi" (no. 25), the Constitutional Court in March 1996 struck down a similar residence permit ("propiska") requirement imposed by the city of Moscow. The weekly commented that by ignoring the earlier Constitutional Court decision, the Moscow Oblast legislature had forced the court to consider the same case twice.


Prime Minister Chernomyrdin has signed power-sharing agreements between the federal government and the administrations of Saratov and Vologda Oblasts, ITAR-TASS reported on 2 July. More than two dozen of Russia's 89 regions have signed similar agreements with federal authorities to obtain various economic and political privileges. Saratov Governor Dmitrii Ayatskov and Vologda Governor Vyacheslav Pozgalev were both Yeltsin appointees who easily won gubernatorial elections in their oblasts in fall 1996.


The 26 members of the Tajik Reconciliation Council have been named, RFE/RL corespondents in Dushanbe reported. The council has13 members from the United Tajik Opposition and 13 from the Tajik government. Among the government members are Deputy Prime Minister Basgul Dodikhudoyeva, First Deputy Parliamentary Speaker Abdumajid Dostiyev, presidential adviser Ibrahim Usmonov, and Minister of Labor Shukurjon Zuhurov. The UTO representatives include UTO leader Said Abdullo Nuri and chairman of the Democratic Party Juma Niyazov. The council will convene in Moscow on 7 July to elect a chairman from the UTO and a deputy chairman from the government. The question of a general amnesty will also be discussed.


Nursultan Nazarbayev, speaking on national television and radio on 2 July, told pensioners all arrears will be paid by the end of 1997, RFE/RL correspondents in Almaty reported. On 1 July, a new system for paying pensions was launched whereby pensioners are to receive their benefits on the first day of the following month (meaning June pensions were to be disbursed on 1 July). Nazarbayev promised pensions would be paid regularly and without any delay, saying a special state board will make sure that local administrations do not use pension funds for other purposes, as has happened in the recent past. The president called on pensioners to be patient and not to take part in demonstrations or other protests.


Askar Akayev told journalists in Bishkek on 2 July that the customs union between Russia, Belarus, Kazakstan, and Kyrgyzstan has not lived up to expectations owing to problems "between Russia and Kazakstan," RFE/RL correspondents and Russian media reported. He pointed out that Kazakstan has raised its customs tariffs without consulting other union members. Akayev said if the union functioned at its full potential, Kyrgyzstan could boost its trade turnover with Russia and Kazakstan by three or four times. He also noted that Kyrgyzstan's GDP grew by 5% in the first half of 1997 and said that, on the whole, the privatization process has been successful.


Following talks on 1 July in Tbilisi with Georgian President Eduard Shevardnadze and parliamentary chairman Zurab Zhvania, Russian Security Council Deputy Secretary Boris Berezovskii flew to Sukhumi to discuss with Abkhaz President Vladislav Ardzinba unspecified proposals for resolving the Abkhaz conflict, Russian and Western agencies reported. Berezovskii flew back to Tbilisi on 2 July with proposals that Georgian Foreign Minister Irakli Menagharishvili characterized as "rather interesting," according to ITAR-TASS. After a second round of talks with Shevardnadze, Berezovskii returned to Sukhumi with Zhvania and Georgian Ambassador to Russia Vazha Lortkipanidze, "Nezavisimaya gazeta" reported on 3 July. Berezovskii said that the negotiations were "difficult" but that the main goal is to "move forward all the time."


Meanwhile, Russian Defense Council Secretary Yurii Baturin held talks in Tbilisi on 2 July with Shevardnadze and Georgian Defense Minister Vardiko Nadibaidze on military and economic cooperation, Russian and Western agencies reported. Baturin later told journalists that it is in the interest of both countries that Russia maintains its military bases in Georgia. Baturin said that the CIS peacekeeping force currently deployed along the border between Abkhazia and the rest of Georgia would be withdrawn after its mandate expires on 31 July if Georgia insists. But he warned that this could lead to a resumption of hostilities, Reuters reported. After discussing Georgia's claims to part of the Black Sea fleet with Nadibaidze, Baturin told journalists that the value of the former Soviet naval base at Poti far exceeds that of the vessels formerly stationed there, according to Interfax.


The Iranian Foreign Ministry has formally protested to the Azerbaijani ambassador in Tehran about the alleged mistreatment of Iranians held in Azerbaijani jails, Western agencies reported, citing IRNA. An Iranian Foreign Ministry official claimed that three Iranians recently died as a result of ill treatment and that conditions in Azerbaijan's prisons do not conform with international standards.


A spokesman for Leonid Kuchma told journalists on 2 July that the president has signed a decree accepting the resignation of Prime Minister Pavlo Lazarenko on health grounds. Lazarenko had announced earlier he was stepping down because of illness. He was temporarily relieved of his duties on 19 June and hospitalized. His deputy, Vasyl Durdynets, was named acting prime minister. The spokesman quoted Kuchma as saying that reforms will move faster in the country after the prime minister's resignation. Durdynets has been re-appointed acting prime minister, and Kuchma had decreed the cabinet should keep working until a successor to Lazarenko is named.


Kuchma and his Czech counterpart, Vaclav Havel, said on 2 July that NATO's eastward expansion is a "natural process". The two signed a statement in Kyiv calling on NATO to remain "open to all interested countries which are ready for membership." At a joint news conference, Havel said that former Soviet republics are "fully within their rights to apply for membership and be accepted" into NATO. He specifically mentioned the Baltic States. Meanwhile, on 3 July, the presidents of Romania, Ukraine, and Moldova are scheduled to meet in the Ukrainian city of Izmail to discuss regional cooperation


A man tried to burn himself in downtown Minsk on 2 July to protest the authoritarian rule of President Alyaksandr Lukashenka. With the help of bystanders, he wound up dousing the flames and walking away. The man condemned Lukashenka's policies as "concealed genocide" against his own people and said he wanted "to spoil the president's holiday." Belarus celebrates the National Independence day on 3 July. Formerly, the holiday was celebrated on 27 July but was changed after the controversial referendum in November. The new date coincides with Belarus's liberation from the Nazis. Opposition forces plan to celebrate Independence day on 27 July, which marks the anniversary of when Belarus broke away from the former Soviet Union.


Four children died and more that 60 others were injured on 2 July when a bus overturned at high speed in heavy rain near Kobrin, in southern Belarus, ITAR-TASS reported. The bus was taking children aged 7 to 14 from a region of Belarus affected by the 1986 Chornobyl nuclear accident to a health resort in Belgium. Police said three of the injured were in serious condition.


told Belarus on 2 July it will have to improve its human rights record if it wants Washington to unfreeze funds intended to help Belarus destroy Soviet-era nuclear missile launch pads, Reuters reported. A U.S. State Department statement says "some $40 million of planned Cooperative Threat Reduction (CTR) assistance was not released to Belarus in 1997 because the U.S. was unable to certify Belarus for compliance with the human rights requirements mandated by the CTR program." Meanwhile, the Belarusian government on 2 July announced that Belarus will send a delegation to the NATO summit in Madrid on 8-9 July. The delegation will be led by Victor Sheiman, the head of the National Security Council.


Latvian Foreign Minister Valdis Birkavs, opening the sixth session of the foreign ministers of the Baltic Sea Council, said that the success of the regional cooperation body depends to a great extent "on the degree to which Russia gets involved in its activities," BNS reported on 2 July. Foreign ministers from the Baltic States, Scandinavia, Poland, and Germany are attending the two-day meeting in the Latvian capital. Deputy Foreign Minister Aleksandr Avdeev is representing Russia. He explained that Foreign Minister Yevgenii Primakov was unable to attend because of his "exceptionally tight schedule," stressing that his absence should not be " neglect of the region or lack of respect for Latvia," Interfax reported. Latvia currently holds the rotating presidency of the council and has set economic cooperation as its priority goal. Birkavs noted that efficient use of the existing infrastructure would help reduce differences between the countries of the Baltic region.


Mart Siimann told journalists on 2 July that relations between Estonia and Lithuania are "perfectly normal and good," ETA reported. Siimann said press reports give the impression that Estonian-Lithuanian relations have recently become "very tense." He stressed this was not the case: "Estonian and Lithuanian views may not always coincide but there are no serious disputes." Siimann added that one issue over which the countries differ is the "attitude to [EU] enlargement." In June, the Baltic premiers failed to issue a joint declaration on joining the EU following their summit in Tallinn (see "RFE/RL Newsline," 13 and 16 June 1997). Estonia and Latvia were reported to be in favor of declaring that if only one of the Baltic States were admitted, the other two would nonetheless benefit. Lithuania, however, had wanted to state that the three countries are in favor of joining simultaneously.


Marek Belka told journalists on 2 July that his country's entry into NATO will stimulate the Polish economy, despite the costs of upgrading the armed forces. He said that, as a member of NATO, Poland will be perceived as a more secure and stable country, which will attract foreign investors, especially those bringing high technology. He said Poland's national budget was able to bear the direct costs--estimated at $100-150 million annually during the next few years--of making the armed forces inter-operational with NATO. He conceded that modernizing the army will be more expensive but noted that the costs will have to be borne anyway. Military analysts estimate modernization of the army will cost between $11 billion and $19 billion, spread over many years.


The junior partner in Poland's ruling coalition, the Polish Peasant Party (PSL), on 2 July rejected government proposals for next year's budget and told its members to vote against them. A party spokesman told journalists in Warsaw that the party rejects certain economic assumptions made by the Finance Ministry as it prepares a budget draft. He added that ministry proposals to shrink the country's budget deficit could slow economic growth, while maintaining high interest rates could halt business growth at a time of falling inflation rates. Party leader Waldemar Pawlak said the proposals could increase unemployment and would not stimulate exports. Recently, the coalition of the PSL and the larger Democratic Left Alliance--former Communists--has shown increasing strains.


U.S. State Department spokesman Nicholas Burns told journalists in Washington on 2 July that there is no concern whatsoever in the U.S. about the Czech Republic's ability to meet the financial criteria of NATO membership, despite the country's current economic problems, RFE/RL's Washington correspondent reported. Burns said it would be hard to find a government in Central Europe--with the possible exception of Estonia--that has done so much to reform its economy. He added that although Prague is experiencing problems right now, there is no reason to question the U.S. decision to support the Czech Republic for membership in the Western alliance. Meanwhile, the Czech Foreign Ministry has announced U.S. Secretary of State Madeleine Albright will pay a two-day visit to the Czech Republic starting 13 July.


Vladimir Meciar told top police officials on 2 July that Slovakia's membership in the EU is being "postponed for later times," as in the case of its entry to NATO, Slovak Radio reported. "When judged by its economic results, Slovakia ranks among the most developed Central European countries and most significant bidders, " Meciar argued. However, its invitation to join the EU is being postponed owing to "unnecessary domestic political clashes." The premier said Slovakia wants to continue cooperating with NATO countries on questions related to its security. "We will wait for the next wave of [NATO] enlargement," he added.


Wlodzimierz Cimoszewicz, on a one-day visit to Hungary on 2 July, met with his Hungarian counterpart, Gyula Horn. Cimoszewicz stressed that Poland, like Hungary, wants Slovenia and Romania included in the first wave of NATO expansion, but he noted that "it is not us who will take this decision." Horn appealed to Poland and the Czech Republic not to ignore Slovakia's efforts to integrate into NATO and Euro-Atlantic structures. He called for "reactivating" the Visegrad group but not as a means of exerting pressure on Slovakia. Horn added that Budapest wants Slovakia to meet NATO and EU requirements "as soon as possible."


The Socialists and the Free Democrats on 2 July proposed that the parliamentary commission investigating the Tocsik privatization scandal (see "RFE/RL Newsline," 26 June 1997) be disbanded. Tamas Deutsch, the chairman of the commission, said the coalition partners are opposed to approving, publishing, or allowing the legislature to debate the commission's final report because they are "implicated" in the affair, according to Hungarian media.


President Sali Berisha said in Tirana on 2 July that "there will be no co-habitation," which presumably means he intends to keep his promise to resign following the Socialists' election victory. But Prime Minister Bashkim Fino said the same day that he is at odds with the president after Berisha ordered the elite presidential guard to protect streets and the National Bank in Tirana. Fino issued a counter-order, saying that such work is the duty of the police. The current interior minister, who controls the police, is the Socialist Sokol Baraj, whom Fino appointed after Baraj's Democrat predecessor fled the country on 1 July (see "RFE/RL Newsline," 2 July 1997). Fino refused the next day to appoint as minister the Democrat Azem Hajdari, who is Berisha's nominee, "Gazeta Shqiptare" reported.


The monarchist Legality Party held a rally attended by some 200 people in Tirana on 2 July. Speakers claimed that the Socialists stole the monarchists' victory in the referendum on the monarchy (see "RFE/RL Newsline, 2 July 1997). The police stopped the rally, which had not been formally registered as required by law, but there was no major violence, "Dita Informacion" reported. Also on 2 July, armed monarchists set up a roadblock, in Mamuras, north of Tirana, for a short time. Meanwhile in Tirana, the Socialists held a victory rally of about 10,000 people. Speakers included not only Socialist leaders but also key personalities from the Democratic Alliance and Social Democrats, an RFE/RL correspondent reported from the capital. The party leaders called for national reconciliation and promised to establish the rule of law and democratic institutions.


A large fire broke out in a oil storage area in Vlora when a storage tank caught fire on 2 July, "Gazeta Shqiptare" reported. Local residents had to be evacuated, but looters hindered firefighters from doing their job. In Fier, three people were accidentally killed and seven injured on 2 July when people fired wildly into the air following Berisha's televised admission of electoral defeat, "Dita Informacion" reported.


The leadership of the Bosnian Serb army met with embattled Republika Srpska President Biljana Plavsic in Banja Luka on 2 July, an RFE/RL correspondent reported from that Bosnian town. The general staff said in a statement that the army supports the constitutional order, which includes backing the president as the army's commander-in-chief. The generals added that they hope for a speedy end to the ongoing crisis between Plavsic and the hardliners around Radovan Karadzic, lest the feuding lead to a split among Serbs in general and in the army in particular. The army's support is doubtless a boost to Plavsic, but the main instrument of coercion in the Republika Srpska is the police, who are loyal to her opponents.


Biljana Plavsic said in Banja Luka on 2 July that the charges made against her by her own Serbian Democratic Party are groundless (see "RFE/RL Newsline," 2 July 1997). She commented that it is strange that her opponents insist she resign over political differences, given that those same individuals did not call for the resignation of army commander Gen. Ratko Mladic after the Bosnian Serb army's disastrous defeats in 1995. Plavsic stressed that the Bosnian Serbs have no choice but to carry out the Dayton agreement, even though they did not sign it. Meanwhile in Pale, Republika Srpska Prime Minister Gojko Klickovic repeated accusations that Plavsic is doing the bidding of foreign powers and pushing for the re-establishment of a unitary Bosnia-Herzegovina.


British SFOR peacekeepers strengthened their patrols in Banja Luka in an apparent warning to Bosnian Serb hardliners not to use their police force against Plavsic. NATO helicopters flew overhead as part of the display of force. Meanwhile, U.S., British, and French government spokesmen all expressed support for the Bosnian Serb president. U.S. State Department spokesman Nicholas Burns added that Plavsic's main enemy, Radovan Karadzic, is a "snake in the grass" and a "poisonous influence" in the region. In Sarajevo, representatives of the UN and Organization for Security and Cooperation in Europe also said they back Plavsic.


In The Hague, the prosecution in the trial of Dusan Tadic on 2 July called the Bosnian Serb "evil" and demanded life imprisonment for him. In Sarajevo, UN spokesmen said Jacques Klein, the current UN chief administrator in eastern Slavonia, will become first deputy to Carlos Westendorp, the international community's chief representative in Bosnia. In Podgorica, the opposition coalition threatened to boycott the parliament unless the legislature discusses Montenegro's backing for Slobodan Milosevic's candidacy for the Yugoslav presidency. Opposition spokesmen said that the governing Socialists, who have endorsed Milosevic, cannot claim to speak for all Montenegro in the matter, an RFE/RL correspondent reported from the Montenegrin capital. And in Zagreb, a bomb damaged a boutique on 3 July. News agencies said the incident appears to be part of an increasingly violent competition among criminals.


Emil Constantinescu, on a short "working visit" to Bonn on 2 July, discussed with Helmut Kohl Romania's bid to be admitted to the enlarged NATO. A spokesman for the German government said Kohl and the cabinet support the Romanian desire for early NATO membership. He added that the decision should "be made on the basis of consensus of the 16 NATO partners in Madrid." On his return to Bucharest the same day, Constantinescu said he discussed with Kohl the necessity to increase German investment in Romania and a number of "projects of European interests," Radio Bucharest reported.


Following the 1 July publication of a report by Valerian Nastase, head of the government's Control Department, tensions are growing between the junior coalition partner, the Democratic Party, and other members of the coalition. The report says that Democratic Party chairman Petre Roman, Foreign Minister Adrian Severin, and Transportation Minister Traian Basescu illegally acquired apartments from the state and paid considerably less than their market value. The report also incriminates other members of the ruling coalition, as well as members of the former government (including former President Ion Iliescu). Basescu rejected the accusations on 2 July and said his party will soon discuss whether it is feasible to prolong the existing coalition partnership. Prime Minister Victor Ciorbea said the Democratic Party's threats were "out of line." He added that the government cannot "stray from the principles" included in its program.


The parliament on 2 July debated President Petru Lucinschi's recent address urging lawmakers to pass legislation providing for the sale of land, administrative-territorial reform, and a higher retirement age, RFE/RL's Chisinau correspondent reported. Lucinschi had hinted that failure to pass the bills, which are considered by international financial organizations as conditions for the continuation of aid to Moldova, might lead to the dissolution of the legislature. On 1 July, Prime Minister Ion Ciubuc had threatened to resign if the bills were not passed. Most members of the majority Democratic Agrarian Party, as well as the Socialists and Socialist Unity-Edinstvo deputies, spoke out against the reforms at the 2 July session. The opposition said Lucinschi is now urging reforms that he previously blocked in his capacity as parliamentary chairman .


Lt.-Gen. Valerii Yevnevich told a visiting delegation from the European Parliament on 2 July that he is "categorically opposed" to deploying Ukrainian peacekeeping troops in the region, BASA-press and Infotag reported. Ukrainian peacekeepers are stipulated in the 8 May agreement between Chisinau and Tiraspol. Yevnevich said that if they are brought in, "Russian peacekeepers will have nothing more to do here." He added that the Ukrainians should have come in 1992 "instead of waiting till somebody pulls the chestnuts out of fire" for them. Yevnevich told the delegation that part of the Russian contingent's stockpiles will be sold and the earnings channeled to help Transdniester's economic development. Erika Mann, the head of the European Parliament's delegation, said the EU might participate in finding solutions to the conflict by monitoring the withdrawal of Russian armament.


Petar Stoyanov, at the start of a three-day visit to Greece, met with his counterpart, Kostas Stephanopoulos, and Prime Minister Kostas Simitis, Reuters reported on 2 July. During his visit, the two countries will sign an agreement on the construction of a new bridge next to the existing one at the northern Greek Promahonas border post. The project will be financed entirely by Athens. Stephanopoulos said Greece backed Bulgaria's efforts to become a member of NATO and the EU. In other news, economic ministers of CEFTA member countries are scheduled to meet in Bled, Slovenia, on 3 July to begin negotiations with Bulgaria on its admission to the organization.


At the end of his four-day visit to Bulgaria, South African Defense Minister Joe Modise and his Bulgarian counterpart, Georgi Ananiev, signed an agreement on military cooperation, BTA reported on 2 July. The agreement provides for cooperation in defense technologies and military industries. Modise also met with Premier Ivan Kostov. On 30 June, a car transporting the two delegations was involved in an accident near Sofia in which a woman working for the French Embassy in the Bulgarian capital was killed and her husband injured. Modise and Bulgarian Deputy Defense Minister Gen. Simeon Petkovski were slightly injured.


by Michael Wyzan

The American University of Armenia staged a conference in Yerevan in mid-June on "The Transcaucasus Today: Prospects for Regional Integration." Participants included officials and scholars from Armenia and Georgia, along with foreign specialists on the area. Officials were also invited from Baku, but they declined to attend. The Azerbaijani view was presented instead by Azeris living abroad and by Western scholars.

The conference highlighted Armenia's frustration with what it perceives as a tilt in the West (and especially the U.S.) toward the Azerbaijani position on the Nagorno-Karabakh dispute--a shift that they blame on the attractiveness of Caspian Sea oil. Whatever the topic under discussion at the conference, the participants kept returning to petroleum--a subject that is obviously of great importance to Azerbaijan. Georgia will be the site of one or more pipelines carrying Azerbaijani oil. Since it enjoys good relations with Azerbaijan, Georgia need not sacrifice other national objectives to enjoy those pipelines' economic and other benefits.

On the other hand, it is unlikely that Armenia would be the site of a pipeline carrying Caspian oil. The only way to convince Azerbaijan to agree to such a scenario would presumably be to return Nagorno-Karabakh to Azerbaijani sovereignty. Moreover, even if such a pipeline were built, Azerbaijan could always stop the flow of oil in response to a provocation or try to convince Armenia to change its position on an issue under discussion.

World Bank economist Jonathan Walters argued that the large investments in infrastructure that the region urgently needs cannot be financed without substantial (private) foreign direct investment. He noted that reforming the state--including establishing judicial independence and appropriate regulation of natural monopolies--is pivotal to attracting investors in the infrastructure. Foreign investment and increased exports will gain in importance as the international financial institutions wean the Transcaucasian states from generous support for their fiscal and current account imbalances.

Robert E. Ebel of the Center for Strategic and International Studies in Washington, D.C., noted that U.S. energy policy prioritizes reducing the country's dependence on Persian Gulf oil. That fact accounts for the U.S.'s recently awakened interest in the region. In the early 20th century, Great Britain dominated the concessions working Caucasian oil deposits.

Ebel observed that oil wealth need not promote economic development; instead, it may result in arms races, corruption, large-scale consumer-goods imports, and the construction of show projects. The former USSR's concentration on exploiting oil and gas deposits in Russia--rather than those in Azerbaijan, Kazakstan, or Turkmenistan--has left a significant share of unexploited deposits in those new states. However, despite the growing interest in those deposits, Caspian Sea oil cannot replace Persian Gulf oil in terms of political risk, quantity, cost of production, or market access. Ebel expects that within ten years, Caspian Sea oil will account for only 3%-4% of world production.

Andrei Illarionov of the Institute of Economic Analysis in Moscow noted that the Transcaucasian states suffered from the sharpest output declines in the Council of Independent States (CIS). However, economic growth resumed early, starting with Armenia (the first CIS member to experience positive growth) in 1994, followed by Georgia in 1995 and Azerbaijan last year. Inflation and budget deficits have fallen markedly in all three countries. Illarionov noted that inter-regional trade is below potential, although trade volumes between Georgia and the other two countries have recently risen significantly. The long-awaited oil and gas investment boom in Azerbaijan began in 1996, when it received 17% of gross domestic product in foreign direct investment.

In the end, it seems pointless to lecture the Armenians--as many Western participants did--on the economic benefits of improved relations with their neighbors. Armenia (and Nagorno-Karabakh) would no more sacrifice their perceived national interests to share Azerbaijani oil wealth than Israel would withdraw from the Golan Heights in exchange for a similar promise from Iran or Saudi Arabia. Rapprochement between Armenia and Azerbaijan may be a distant prospect.

Fortunately, technological advance has made such a rapprochement less crucial for Armenia's economic development than in the past. Today, a land-locked nation that has troubled relations with its neighbors but a highly skilled population and good connections with the outside world should be capable of enjoying rapid economic growth. For example, diamonds polished in Armenia, exported by air to Antwerp, are currently one of Armenia's largest exports.

Once political and economic life is sufficiently stable, the prospects of Diaspora Armenians and others investing in the creation of a local "Silicon Valley" are likely to be good. Such activity has already begun. The author is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria.