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Newsline - October 22, 1997


The Communist faction on 22 October withdrew a motion to vote no confidence in the government from the State Duma's agenda for the day, RFE/RL's Moscow bureau reported. Communist leader Gennadii Zyuganov told Duma deputies that his party is satisfied with the outcome of recent talks in the Kremlin, which, Zyuganov said, would lead to "better mutual understanding" and "a more rational balance" between the legislative and executive branches. President Boris Yeltsin released a letter on 21 October agreeing to regular meetings of the "council of four" (composed of the president, prime minister, and Duma and Federation Council speakers). Yeltsin's letter also called for a series of round-table talks on important policy issues. However, Zyuganov warned his faction reserves the right pursue a no-confidence vote in the future if the round-table talks and "council of four" meetings produce no results, Reuters reported.


Most deputies in the Communist-allied Popular Power and Agrarian factions supported the 21 October decision by the Communist faction to drop the no-confidence motion, Russian news agencies reported. Popular Power leader Nikolai Ryzhkov argued that Yeltsin "met us halfway" on most issues. However, Duma Deputy Speaker Sergei Baburin told ITAR-TASS the next day that he and several other Popular Power deputies will not withdraw their signatures in support of a no-confidence motion. Baburin dismissed the settlement as a "pseudo-compromise" and said Zyuganov made a "strategic error." The opposition daily "Pravda-5" on 21 October warned that if the Duma pursues a strategy of "appeasement," it will in effect "commit suicide" as an opposition force. The paper said proposed negotiations may be merely a "fig leaf" for the government and asked rhetorically, "Why should the opposition play these games?"


Prime Minister Viktor Chernomyrdin and Yabloko leader Grigorii Yavlinskii exchanged harsh words in the Duma on 22 October over the fate of the tax code, RFE/RL's Moscow bureau reported. Yeltsin's letter the previous day instructed the government to withdraw the tax code "in accordance with current State Duma procedures for consideration of a law that has been passed in the first reading." Yavlinskii repeatedly asked Chernomyrdin whether he will fulfill the president's order, but Chernomyrdin said the Duma must act on Yeltsin's instruction. Yavlinskii argued that the order is clearly addressed to the government. But speaking to ITAR-TASS, Duma Speaker Gennadii Seleznev supported Chernomyrdin. He noted that Duma procedures on returning a law to the government after it has been approved in the first reading are extremely complicated. Yavlinskii has said Yabloko will support a no-confidence motion unless the government withdraws the tax code.


Yeltsin's 21 October letter confirmed that the land code will be the main item on the agenda in the first meeting of the round table, scheduled for 22 November. The second session, to be held in December, will discuss compensating citizens for pre-1992 savings accounts that lost their value because of high inflation in the 1990s. At the third round table, participants will discuss policy on energy prices. Yeltsin's letter also ordered that a special commission of government, Duma, and Federation Council representatives be formed to discuss housing reform. "Kommersant-Daily" argued on 22 October that by offering to withdraw the tax code and by acknowledging that housing policy needs refining, Yeltsin dealt a serious blow to First Deputy Prime Ministers Anatolii Chubais and Boris Nemtsov. Chubais has overseen tax reform plans, and Nemtsov has been responsible for the government's housing policy.


Yeltsin's 21 October letter also ordered that a conciliatory commission of government and parliamentary representatives be formed to discuss amending the law on the government. That law would increase the Duma's influence over the government's composition (see "RFE/RL Newsline," 20 and 21 October 1997). In the summer, the Duma and Federation Council overrode the presidential veto of the law, but Yeltsin refused to sign it, charging that the parliament used unconstitutional procedures to achieve the necessary two-thirds majority vote. The Constitutional Court has been asked to decide whether Yeltsin must sign the law, but no date for court hearings has been set.


Prime Minister Chernomyrdin on 21 October signed a government directive on increasing parliamentary access to the media in accordance with agreements reached at the previous day's meeting of the "council of four," Russian news agencies reported. The directive orders the creation of public oversight councils at the two state-controlled nationwide television networks, Russian Public Television and Russian Television (RTR). Parliamentary representatives will be invited to join the councils. (Aleksei Simonov, who heads the watchdog Glasnost Defense Foundation, expressed doubt that the supervisory councils will genuinely influence the networks' programming policy, ITAR-TASS reported.) The government directive also stipulates that parliamentary activities receive two hours of air time each week on state-owned national radio stations and two hours on RTR. In addition, the draft 1998 budget will be amended to provide funding for a new parliamentary newspaper.


Duma deputy Vladimir Lopatin of the Russian Regions faction charged in "Izvestiya" on 22 October that the Interior Ministry circulated false rumors when it released an statement recently saying 20,000 prison workers have resigned. The statement warned that prospects for keeping order in prisons could be threatened by the mass departures of staff, who, according to the Interior Ministry, oppose plans to transfer the prison system to the jurisdiction of the Justice Ministry (see "RFE/RL Newsline," 10 October 1997). However, Lopatin said prison officials in Vologda Oblast told him none of their employees has resigned. Lopatin suggested that the Interior Ministry sought to raise fears of prison riots because it stands to lose "an enormous piece of the budget pie" if funds for maintaining prisons are allocated to the Justice Ministry instead.


Russian Foreign Ministry spokesman Gennadii Tarasov on 21 October that a U.S. test of a laser beamed at a satellite four days earlier is causing "increasing concern in Moscow," Interfax reported. Tarasov added that "Russia is closely following this work" because "objectively, the development of laser programs may lead to the creation of anti-satellite potential." Such systems, Tarasov suggested, might violate the Anti-Ballistic Missiles Treaty and might "sharply change the strategic situation," forcing the Russian government to review its own policy of "restraint in this area."


The Russian government will not bear any responsibility for any energy project that Chechnya concluded with international partners without Moscow's consent, Russian government spokesman Igor Shabdurasulov told journalists on 21 October. Shabdurasulov also rejected as illegal a proposal by Chechen First Deputy Prime Minister Movladi Udugov that the international consortium engaged in exploiting three Azerbaijani Caspian oil fields lease the Chechen sector of the Baku-Grozny-Tikhoretsk export pipeline. Shabdurasulov affirmed that the pipeline belongs to the Russian federal government.


Executives from the diamond monopoly Almazy Rossii-Sakha (Alrosa) and the South African-based multinational corporation De Beers signed a diamond exporting agreement in Moscow on 21 October. Under the agreement, Alrosa must sell at least $550 million and up to $1.2 billion in uncut diamonds to De Beers between 1 December 1997 and the end of 1998. Diamond exports that circumvent the De Beers Central Selling Organization will be limited. Russian Deputy Finance Minister German Kuznetsov hailed cooperation between Alrosa and De Beers as a "guarantee of stability on the world diamond market," ITAR-TASS reported. De Beers Vice President Nicholas Oppenheimer expressed hope that both sides will abide by the deal, which "recommits Russia to the principle of single-channel marketing," AFP reported. In recent years, De Beers has accused Alrosa of exporting too many uncut diamonds without going through the Central Selling Organization.


Aleksei Severnii, the president of the Independent Association of Children's Psychiatrists and Psychologists, told Interfax on 21 October that there are at least 1 million homeless children in Russia. (According to the State Statistics Committee, Russia's population was 147.2 million, as of 1 August.) Severnii estimated that Moscow and St. Petersburg each have some 60,000 homeless children, not including the offspring of refugees and immigrants. He added that the State Youth Committee has estimated that 40 percent of children suffer from psychological or physical violence from teachers. In 1996, he said, 200 children were killed by family members and some 2,000 committed suicide.


The Saratov Oblast Duma has approved in the first reading a law that would legalize the purchase and sale of farmland in the region, while imposing some restrictions, "Izvestiya" reported on 22 October. The law states that agricultural land must continue to be used for farming, and it provides for fining owners who use such land for other purposes. "Russkii telegraf" on 17 October quoted presidential spokesman Sergei Yastrzhembskii as saying Yeltsin "fully and wholeheartedly supports" the Saratov land law. (The communist opposition strongly opposes legalizing the purchase and sale of farmland.) Samara Governor Konstantin Titov told the 16 October "Russkii telegraf" that a similar land law is being drafted in his oblast. Such laws contradict current federal legislation, but Saratov Governor Dmitrii Ayatskov told "Izvestiya" that he will encourage the parliament to amend the relevant federal laws. Speaking to "Russkii telegraf," Titov expressed confidence that the constitution is "on our side."


Murmansk Oblast residents have collected more than 10,000 signatures demanding special pension benefits continue for those who have worked in far northern regions, ITAR-TASS reported on 21 October. The petition, addressed to the president, government, and parliament, protests the method for calculating pensions outlined in a law signed by Yeltsin in July. Under that law, which will take effect in February 1998, pension benefits would be determined in part by the number of years of employment, regardless of where citizens worked. According to ITAR-TASS on 14 October, the Murmansk residents want each year of employment in northern regions with harsh climates to be equivalent to 18 months' labor in other parts of the country.


Leading politicians and public organizations in several North Caucasian republics are opposed to the new Russian passports, an RFE/RL correspondent in Vladikavkaz reported on 22 October. In particular, they object to the symbol of the two-headed eagle, which is perceived as a remnant of Russia's imperial past. Dagestan parliamentary chairman Mukhu Aliyev warned that "an explosion of nationalist sentiment" will protest the failure to designate the passport holder's nationality. Ingush President Ruslan Aushev and some Tatar politicians have similarly argued that the passports should show the holder's nationality. Writing in "Nezavisimaya gazeta" on 22 October, former Russian Nationalities Minister Valerii Tishkov said the removal of the mention of nationality in the new passports was one of the most significant developments in Russia's nationalities policy in recent years.


The parliamentary faction Social State has demanded that the legislature hold hearings on the current state of the Nagorno-Karabakh peace process, RFE/RL's Yerevan bureau reported on 21 October. Gegham Gharibjanyan, the group's leader and chairman of the parliamentary committee on social affairs, said deputies must not be excluded from the decision-making process on resolving the conflict. He urged the parliament to take a clear stance on the latest peace plan proposed by the Organization on Security and Cooperation in Europe's Minsk Group, which sponsors the negotiations.


Ten deputies have left the majority Hanrapetutyun parliament bloc to join with four other deputies in a new faction called Yerkrapahner, according to RFE/RL and Noyan Tapan on 21 October. The new group will represent the pro-government yerkrapah volunteer militia that is loyal to Defense minister Vazgen Sargsian. The group's leader, Albert Bazeyan, told the parliament his faction will seek to support Armenia's armed forces. In an interview with "Iravunk" on 10 October, Bazeyan said the faction will insist that a just solution to the Karabakh conflict be based on the Karabakh Armenians' right of self-determination." He rejected the proposed withdrawal of Armenian forces from occupied Azerbaijani territories between Karabakh and Armenia. The defection of the 10 deputies leaves Hanrapetutyun with 96 mandates in the 189-seat parliament.


Djemal Gogitidze, the chairman of the Aghordzineba faction within the parliament, has corroborated former Batumi Mayor Tamaz Kharazi's allegations against parliamentary speaker Zurab Zhvania, according to Caucasus Press on 22 October. Kharazi told Adjar Television three days earlier that Zhvania had tried to enlist his support in ousting Aslan Abashidze, the chairman of the Adjar Supreme Soviet (see "RFE/RL Newsline," 21 October 1997). The Aghordzineba faction originally numbered 31 deputies from Abashidze's All-Georgian Union of Revival and was the third largest within the Georgian parliament until nine deputies left the faction earlier this year.


Police are still preventing 2,000 workers from the Achisay Polymetal Plant from continuing with their 900 kilometer protest march to Almaty, RFE/RL's Almaty bureau reported on 22 October. The workers, who began their protest in early October, are demanding the payment of wage arrears. They were halted by police at a bridge over the Aryz irrigation canal, near the southern city of Turkestan (see "RFE/RL Newsline", 16 October 1997). Some 150 workers have gone on a hunger strike.


The military prosecutor-general is considering whether to open criminal proceedings against two senior military officials, RFE/RL's Almaty bureau reported on 22 October. Major-General Alihan Jarbolov, the chief of the Kazakh Defense Forces General Staff, and Lieutenant-General Fedor Shcherbakov, the commander of the Kazakh armys ground forces, are accused of embezzling funds from the state treasury. Jarbolov is reported to have used $60,000 from state funds to purchase a house in Almaty, while Shcherbakov allegedly bought an apartment in Almaty for his daughter.


A shipment of 1,700 metric tons of Kazakh crude has been exported by rail to China's Xinjiang Autonomous Province, where it will be refined, AFP and ITAR-TASS reported on 21 October. A state-owned Chinese oil and gas company signed an agreement with the Kazakh government in September on exploiting oil fields in Aktyubinsk Oblast that have estimated reserves of 130 million metric tons. Kazakhstan and China also signed an agreement on construction of a 3,000 kilometer export pipeline from Kazakhstan to Xinjiang.


Speaking at the consecration of a Roman Catholic cathedral in Minsk on 21 October, Alyaksandr Lukashenka said he will treat all religious groups equally, Belarusian media reported. But in an indication that he has not changed his authoritarian ways, Lukashenka told journalists the same day that "state control over the media" is "completely natural," Interfax-West reported.


A recent poll of 5,000 Belarusians found that only 48.7 percent would vote for President Lukashenka if he seeks re-election, Interfax reported on 21 October. But the poll also showed that only 4.2 percent would back former Belarusian leader Stanislav Shushkevich and only 0.3 percent would vote for Belarusian People's Front leader Zianon Pazniak. Roughly one Belarusian in three supported Lukashenka's handling of the media, democracy, and foreign policy. Some 57 percent said they backed the Russian-Belarusian union, while 23 percent doubted that it exists in practice.


Speaking to a conference of trade union leaders in Kyiv on 21 October, Ukrainian President Leonid Kuchma said bilateral talks with Moscow have failed to prevent a "trade war" between the two countries, Interfax reported. He said that as a result, bilateral trade fell by 18 percent in the first eight months of 1997, compared with the same period last year. In particular, Kuchma criticized Russia's imposition of a 25 percent tariff on Ukrainian sugar. But the Ukrainian leader suggested Kyiv "is close to finalizing its transitional period" in economic reform. Other Ukrainian officials, however, were less optimistic. Oleksandr Ryabchenko, the head of the parliamentary privatization committee, said on 21 October that revenues from privatization are far short of projections and will certainly fail to reach the "planned level of 500 million hryvna" ($267 million) by the end of the year, Ukrainian media reported.


Several Ukrainian political analysts have expressed skepticism that the CIS has any meaningful future. In a discussion on the upcoming Chisinau summit, the Kyiv analytic bulletin "Spivdruzhnist" said on 21 October that "for the first time there is a situation in the CIS where Russia could be in the minority in wanting deeper integration." The weekly added that "Boris Yeltsin will have only two more or less reliable allies at the summit, Armenia and Tajikistan." Other Ukrainian commentators suggested that the CIS should nonetheless be kept alive "at least for the Soviet generations, which still cannot get over the shock of the Soviet Union collapsing."


At the Khmelnitskiy nuclear power plant near Lviv, workers have staged a series of rallies to demand payment of back wages, ITAR-TASS reported on 21 October. The 600 employees of the plant have not been paid since February. Their action threatens the continued operation of the plant, even though under Ukrainian law, workers at such facilities do not have the right to strike.


Excise taxes on gasoline and heating fuel are to be gradually increased until the year 2001, following the passage of a bill in the parliament on 21 October, ETA reported. The annual increases, beginning on 1 December, will bring fuel prices into line with EU levels. Under the first hike, the cost of a liter of gasoline will rise to 7 kroons ($0.5) from 6.20 kroons. Finance Minister Mart Opmann commented that the higher taxes will increase state revenues in 1998 by 240 million kroons. The government has said it intends to use the funds for road repairs.


Russian Foreign Ministry spokesman Gennadii Tarasov has questioned the "purposefulness" of signing a border treaty with Riga following recent statements by Prime Minister Guntars Krasts published in Latvia's Russian-language newspaper "SM," BNS reported on 21 October. Tarasov criticized what he called Krasts's intentions to "revive the theme of territorial claims in relations with Russia [by] citing the Riga Treaty of 1920." He also said Krasts's claim that the problem of Latvia's Russian-speaking population has been resolved is "absolutely inconsistent with the real situation." Tarasov's comments come on the eve of Lithuanian President Algirdas Brazauskas's visit to Moscow, during which he is expected to sign a border demarcation treaty with his Russian counterpart, Boris Yeltsin.


Owing to improvements in macroeconomic performance and tax collection, the Lithuanian government's budget situation has improved by 270 million litas ($67.5 million) on the projected level for 1997, BNS reported on 21 October. The parliament amended the budget to allocate more than one-third of the additional revenues to the State Health Insurance Fund and to increase the wages of public-sector doctors. Smaller sums will be used to raise heating subsidies for low-income families, pensions, and teachers' salaries. The decision to allocate 16.6 million litas to raise judges' wages sparked anger among many deputies, who claimed this will only widen the social gap between justices and workers in the education and culture sectors.


The newly elected Senate on 21 October approved Solidarity Electoral Action (AWS) candidate Alicja Grzeskowiak as speaker by a vote of 61 to 35, PAP reported. The AWS has 51 of the 100 seats in the legislature. But in the Sejm the previous day, the new members approved four deputy speakers--one each from the Democratic Left Alliance, the Peasant Party, the AWS, and the coalition Freedom Union. Also in the lower house, the former Communists said they expect to be able to name the leaders of as many as nine legislative committees.


Josef Wagner, the chairman of the parliament's budget committee, said on 21 October that he will not vote for the proposed government budget. He suggested that the budget draft would have to be resubmitted with modifications in 30 days, "Hosparske Noviny" reported. The coalition government, which controls only 100 of the 200 votes in the parliament, was counting on Wagner's vote to ensure passage of budget proposal.


Ivan Gasparovic, the chairman of the Slovak parliament, announced 21 October that he has canceled a meeting in Bratislava between parliamentary leaders of the EU associate states and European Parliament leaders, TASR reported. Gasparovic said he made that decision because Jose Maria Gil-Robles, the chairman of the European Parliament, has announced he will not participate. Gil-Robles is reportedly upset with the Slovak parliament for failing to abide by a Constitutional Court ruling to reinstate a deputy whom the ruling coalition had expelled from the legislature.


The parliament on 21 October voted to hold an urgent debate on the government's proposal to amend the resolution approving separate referenda on NATO accession and on land ownership by foreigners. One week earlier, the Constitutional Court ruled that the opposition's formulation of the two questions on foreign land ownership, which has been endorsed by 200,000 signatures, takes precedence over the government version. Gyula Horn's cabinet now wants to hold a referendum on NATO accession and a separate plebiscite on land ownership at a later date. The debate in the parliament will be held on 4 November. Only the Smallholders' Party voted against such a debate, Hungarian media reported.


The State Election Commission in Podgorica on 21 October announced that Milo Djukanovic won the presidential election by 5,600 votes. An OSCE spokesman said the tally accurately "reflects the will of the electorate." But supporters of outgoing President Momir Bulatovic charged fraud and claimed that 20,000 votes were stolen from their candidate. Some 2,000 Bulatovic backers staged a protest, and Djukanovic charged that Bulatovic is trying to incite violence. Bulatovic's supporters called for daily demonstrations until the election results are overturned, an RFE/RL correspondent reported from the Montenegrin capital. A Bulatovic spokesman that his side expects "expert help from Yugoslav federal institutions to help verify the election results."


Parliamentary President Dragan Tomic announced in Belgrade on 21 October that presidential elections will take place on 7 December. A previous vote took place on 21 September, but the authorities declared it invalid because less than 50 percent of the electorate turned out following the opposition's call for a boycott. The September elections pitted Socialist candidate Zoran Lilic, who is a protege of Yugoslav President Slobodan Milosevic, against the Radical Party's Vojislav Seselj, who led paramilitary forces in the Croatian and Bosnian conflicts. The opposition says it will take part in the December vote only if the authorities guarantee fair elections and equal access to the media. Spokesmen for the large Albanian minority say Albanians will boycott the vote unless one of the Serbian parties takes a stand on Kosovo that the Albanians can support.


Representatives of Croatian and Yugoslav Railways agreed in Zagreb on 21 October that train services between the two countries will resume on 11 November. One line will link Vinkovci in Croatia with Serbia's Bogojevo to the northeast, and another will connect Vinkovci to Sid in the southeast. Major international trains linking Belgrade to Munich and Zurich via Zagreb will begin running in 1998, an RFE/RL correspondent reported from the Croatian capital. A Croatian spokesman said talks will begin soon on resuming air and river traffic between the Serbia and Croatia. Meanwhile in Belgrade, more than 5,000 people walked in silence through Belgrade for the funeral of Dusan Jovanovic, a Romani teenager killed by skinheads (see "RFE/RL Newsline," 21 October 1997).


Carlos Westendorp, the international community's chief representative in Bosnia, released a report on 21 October saying rampant corruption is undermining the peace process. Graft is especially widespread in the collection of taxes and customs revenues as well in the distribution of international aid. Money is siphoned off to support criminal structures that often overlap with official ones among Croats, Serbs, and Muslims alike. Meanwhile in Mostar, international election officials announced that a recount of the votes in the recent local elections gives the multi-ethnic Coalition for a United and Democratic Bosnia and Herzegovina 15 out of 24 seats, or one more than the coalition got in the first count. The Croatian Democratic Community, which demanded the recount, took only nine seats. In New York, Bosnian co-Prime Minister Haris Silajdzic urged NATO to use force to implement the Dayton agreements.


Representatives of the Croatian Social and Liberal Party, the Croatian Peasants' Party, the Croatian People's Party, and the Istrian Democratic Assembly introduced a bill in the parliament on 21 October giving the opposition control over the second channel of Croatian Radio and Television (HRT). Liberal leader Vlado Gotovac said the opposition wants to establish an "objective" news and information channel. HRT is controlled by the governing Croatian Democratic Community, and the opposition regards HRT's political coverage as heavily biased. Television is the primary source of news for most Croats. And in Moscow, a military spokesman said Russia has begun withdrawing 500 of its 700 paratroopers based in eastern Slavonia. The evacuation of the 500 men and their equipment, including 75 armored personnel carriers, will end on 15 November.


Delegates to a two-day congress of the opposition Democratic Party have re-elected Sali Berisha as party leader and adopted new party statutes, "Rilindja Demokratike" reported on 22 October. Berisha urged that new elections be held soon, saying that the Democrats would win them, Berisha was re-elected party leader over Peter Arbnori, a senior party member who was imprisoned during communism. His victory by 791 to 115 votes suggests opposition to him within the party is limited, even though some party leaders called for Berisha to be replaced following the Democrats' massive losses in the June elections. "Republika" of the conservative Republican Party pointed out that by keeping Berisha as leader, the Democrats have missed an opportunity to elect a leader who could form a coalition with other right-of-center parties and challenge the Socialists.


Authorities in Brindisi have removed 11 bodies from an Albanian ship sunk by an Italian vessel on 28 March but recently raised by Italian engineers (see "RFE/RL Newsline," 20 October 1997). The Italian authorities believe that at least 70 more corpses are still below deck. Sabri Godo, the head of the Albanian parliamentary commission on foreign relations, asked for Albanian participation in the Italian investigation into the cause of the accident. Italy maintains that the sinking was accidental, but many Albanian survivors charge the Italian vessel deliberately rammed the Albanian one.


Visiting Prime Minister Gyula Horn and his Romanian counterpart, Victor Ciorbea, have agreed to finance a Hungarian-language university in Transylvania. The plan to set up separate Hungarian- and Romanian-language sections at Cluj University will be dropped, RFE/RL's Bucharest bureau reported on 21 October. Addressing journalists, Horn said ethnic Hungarians told him the previous day that their situation has "greatly improved" in the last months. He added that they are "better qualified" to judge that situation than any one in Budapest. The two premiers agreed that experts will start working on plans for a Budapest-Bucharest highway. New border-crossing points and Hungarian-Romanian bank are also to be set up.


At a press conference on 21 October, former President Ion Iliescu read aloud a "Letter to the Nation" calling upon the government to honor its electoral promises or "leave the political scene, making room for others, who are more diligent and more loyal to the interests of the country and its population," RFE/RL's Bucharest bureau reported. Iliescu said a protest meeting organized by several opposition parties on 22 October is "just the beginning" of joint action aimed at forcing early elections. Premier Ciorbea said the rally is an "attempt by the opposition to overturn the government by force" and that the government "is ready to meet any challenge." Police announced on 22 October that the meeting will be moved to a square different from that originally authorized, where the "revolutionaries" are on hunger strike.


The Chamber of Deputies on 21 October passed a bill placing the Foreign Intelligence Agency (SIE) under the supervision of a special parliamentary commission, RFE/RL's Bucharest bureau reported. The bill, which has already been approved by the Senate, still has to be promulgated by President Emil Constantinescu. It stipulates that the director of SIE be appointed by the country's president and that the Supreme Defense Council supervise the organization's day-to-day activities.


Moldovan President Petru Lucinschi says relations between Chisinau and Moscow are "strongly hindered" by the still unresolved conflict with the Transdniester separatists In an interview with Interfax on 21 October, Lucinschi pointed out that although Russia recognizes Moldova's territorial integrity, the Russian State Duma has not ratified "even a single agreement" between the two countries. This, he said, shows Duma's deputies "disdain for the bulk of Moldova's population." He also noted that the separatists control more than "12 percent of Moldova's population and much of the territory with a strong industrial potential." This affects trade relations with Moscow because exports to Russia have to overcome "barriers" set up by the separatists, he said. Lucinschi stressed he does not expect a "final solution" to emerge from the upcoming CIS summit in Chisinau.


Ivan Kostov told a conference of foreign investors in Sofia on 21 October that there will be "no going back" in the country's economic reforms program. Kostov stressed that the currency board set up in July has ensured the country has sufficient foreign-currency reserves to make all foreign-debt payments. He pointed out that the parliament on 17 October adopted a law halving the profits tax for investments of more than $ 5 million and for investments creating at least 100 jobs, AFP reported. In other news, trading began on the Bulgarian stock exchange for the first time since its closure in 1947, RFE/RL's Sofia bureau reported on 21 October. During the next two weeks, trading will be limited to shares acquired by privatization funds through voucher privatization.


by Michael Wyzan

Croatia is in an unusual position among transition economies. It has a developed and stable economy, successful tourism, and considerable trade dependence on the EU. Yet it is the only country boasting such an economy with which the EU has not signed a Europe Agreement, much less invited to accession talks.

That situation results from foreign-policy considerations, especially the view of the Western powers that the government has not done enough to promote the Dayton peace process. Until recently, the IMF had been refusing under U.S. pressure to release two $40 million loan tranches, and the World Bank did the same with a $30 million loan. The U.S. pointed to Zagreb's failure to hand over 10 alleged war criminals to the war crimes tribunal in the Hague and to meet other requirements of the Dayton agreement. The war criminals left for The Netherlands on 6 October, and the IMF approved releasing the tranches four days later.

In some respects, Croatia's economy is a star performer. Growth of gross domestic product (GDP) was a healthy 4.2 percent in 1996 (previous years had seen either decline or slow growth). This year, GDP rose by 3.3 percent in the first quarter and 4 percent in the second. However, there are some concerns about capital flight after the delays in releasing the IMF and World Bank funds; as a result, growth may slow later in the year.

The economy is diversified. This year's growth has been buoyed both by industry (industrial production was up 5.2 percent from January to July over the same period last year) and by positive trends in tourism. Tourist arrivals in July and August were up by 34 percent over those months in 1996, with foreigners accounting for 80 percent of tourist nights.

A striking feature of Croatia's economy under transition has been low inflation. Following the introduction of a stabilization program in October 1993, retail prices fell by 3 percent in 1994. While inflation has returned since then, annual rates are very low: 3.7 percent in 1995, 3.4 percent in 1996, and 3.5 percent in the 12 months to August 1997. This is the lowest average inflation among transition economies over the last three-and-a-half years.

High dollar wages and substantial unemployment have characterized Croatia's labor market. The official unemployment rate has been above 15 percent since late 1995, while monthly wages have been just shy of $400 since mid-1996. Both the high dollar wages and the low inflation reflect a peculiarity of former Yugoslav republics: namely, currencies whose values are closer to those in the EU than is the case of conventional formerly planned economies. Croatia has a price level similar to Austria's but wages like those in the Czech Republic.

One of the ramifications of that situation is popular disgruntlement with the standard of living. There are also persistent worries about the competitiveness of the country's manufactured exports and about the trade and current account balances, especially when imports are growing rapidly, as is the case at present.

From January to July, the trade deficit was $2.4 billion, compared with $1.7 billion during the same period last year. Zagrebacka banka, the country's leading commercial bank, forecasts a $4.4 billion trade deficit (compared with $3.3 billion in 1996) and a $2 billion current account deficit ($1.5 billion last year) for 1997 as a whole. Another growing imbalance is the government budget deficit, which the bank forecasts will be 2.5 percent of GDP this year (0.1 percent in 1996).

The growing foreign imbalances suggest the economy may be overheating, as imports are increasing faster than exports. Unlike in other transition countries, however, that is not because the currency, the kuna, is failing to depreciate fast enough to take into account higher inflation than in the country's trading partners. In fact, the kuna has been depreciating this year in such terms.

Both the successes and problems of Croatian stabilization are similar to those of the Visegrad and Baltic economies. A vote of confidence in Croatia's stabilization efforts came with investment-grade ratings from three ratings agencies in January. Those ratings helped make the government's launching of a Eurobond issue successful.

On structural issues, Croatia is less of a star performer. Privatization has been proceeding, but in a way that favors enterprise managers and the administration's political cronies and actually increases the share of state ownership. That increase occurred because the government decided to clarify many enterprises' ownership status by making them explicitly state property, rather than leaving them in the vague category of "social ownership" inherited from the communist period. Meanwhile, the parliament has been resisting privatizing the post and telecommunications monopoly.

However, observers praise Croatia's bank restructuring and privatization efforts. And the economy has model companies, such as pharmaceutical firm Pliva, which in 1996 became the first company in the region to place shares on the London Stock Exchange. The author is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria.