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Newsline - January 29, 1998


Speaking in Paris on 28 January, Russian Foreign Minister Yevgenii Primakov called on Iraq to stop insisting on a moratorium on the work of the UN weapons inspection commission. Both Primakov and his French counterpart, Hubert Vedrine, strongly advised that force not be used against Iraq. The same day, Russian Deputy Foreign Minister Viktor Posuvalyuk met in Baghdad with Iraqi President Saddam Hussein, to whom he handed over a personal message from Russian President Yeltsin. Saddam assured Posuvalyuk that he appreciates the efforts of the Russian leadership to ensure implementation of the November agreement that allows for resuming the work of the UN weapons inspection commission. In Moscow, Deputy Speaker of the State Duma Mikhail Gutseriev and Duma Geopolitics Committee Chairman Aleksei Mitrofanov, both of whom are members of the Liberal Democratic Party of Russia, warned that the use of force against Iraq by the U.S. or Britain would be "inadmissible" and a "terrible mistake," according to ITAR-TASS. LF


The board of directors of the electricity giant Unified Energy System (EES) on 27 January attempted to replace the company's chief executive Boris Brevnov with the former EES head and current chairman of the board, Anatolii Dyakov, RFE/RL's Moscow bureau reported on 28 January. However, various government officials denounced the board's action as illegal, since government representatives in the company were absent from the board meeting. The state has a controlling stake in EES, which operates the nationwide electricity grid and owns controlling stakes in most regional utilities. EES press secretary Sergei Medvedev told RFE/RL that the company considers the attempt to remove Brevnov a "palace coup." Medvedev was Yeltsin's spokesman from March 1995 until August 1996. LB


The attempt to replace Brevnov with the EES old guard appears to be connected to the recent redistribution of power within the government, RFE/RL's Moscow bureau reported. Earlier this month, Prime Minister Viktor Chernomyrdin took away from First Deputy Prime Minister Boris Nemtsov responsibility for supervising energy policy (see "RFE/RL Newsline," 16 and 19 January 1998). Soon after he joined the government last spring, Nemtsov brought in Brevnov, previously a Nizhnii Novgorod banker, to head EES. Nemtsov told reporters in Nizhnii Novgorod on 28 January that both he and Fuel and Energy Minister Sergei Kirienko, who is currently in Kemerovo Oblast, will sort out the situation at EES when they return to Moscow, RFE/RL's correspondent in Nizhnii Novgorod reported. LB


The Audit Chamber is to conduct a thorough examination of EES finances in 1997, RFE/RL's Moscow bureau reported on 28 January. The chamber has already carried out a partial audit of the company. Board chairman Dyakov on 28 January accused Brevnov of various financial improprieties, including drawing loans without the board's permission and charging the company for private travel, Russian news agencies reported. In an interview with RFE/RL's Moscow bureau, Brevnov defended his performance as EES director and denied the company had paid for any personal travel. He accused former EES management of encouraging barter payments and other financial practices that, he said, are now being investigated by the tax police. LB


First Deputy Prime Minister Nemtsov met with leading business figures in Nizhnii Novgorod on 28 January and called on them to join the new association "Buy Only Russian," RFE/RL's correspondent in Nizhnii Novgorod reported. Addressing the founding meeting of that association in Moscow on 23 January, Nemtsov advocated a policy of "reasonable protectionism" that would raise customs duties on some finished products, Interfax reported. He also said the government's new version of the tax code allows Russian companies to deduct advertising expenses as production costs. The measure is aimed at helping domestic firms combat what Nemtsov called "aggressive advertising" of foreign products in the Russian media. LB


During a 28 January session in St. Petersburg, the Federation Council postponed debate on the land code until next month, Council Speaker Yegor Stroev told Interfax. The upper house has delayed consideration of the code several times since the Duma overrode a presidential veto on the code last September. According to Stroev, the Council will vote on the land code using written ballots, allowing deputies who do not attend the February session in Moscow to vote by mail. Yeltsin claims that voting procedure is unconstitutional. He cited the use of mailed- in ballots as grounds for his refusal to sign the trophy art law after both houses overrode his veto last spring. At roundtable talks last month, executive and legislative officials agreed to work out a compromise on the land code within three months (see "RFE/RL Newsline," 29 December 1997). LB


Two prominent commentators for "Nezavisimaya gazeta" argued on 28 January that the presidential election held in 2000 "will not be and cannot be democratic," since Russia lacks a large middle class. "Financial clans," not voters, will choose the next president, they argued. Favored candidates will be presented as an alternative to a "bogeyman" who, in turn, will be portrayed as a destroyer of the country. In 1996, Communist Party leader Gennadii Zyuganov served as the "bogeyman" who threatened to return Russia to the past, the authors argued. In contrast, elites will attempt to frighten the people in 2000 by accusing various presidential contenders of being too close to "bankers, the gas industry, Americans, and so on." "Nezavisimaya gazeta" is almost completely funded by the LogoVAZ group of Boris Berezovskii, who provided substantial financial support to Yeltsin's 1996 presidential campaign. LB


Oleg Naumov, who killed seven fellow soldiers in Sakhalinsk on 26 January, was "high on acetone fumes" at the time and is a self- confessed substance abuser, Russian media reported. Naumov, who has been taken into custody, says he does not remember the shooting spree because he was "so high" at the time. The previous day outside Moscow, a soldier killed one of his colleagues. Several articles in Russian newspapers show that youths have serious doubts about serving in the army. According to the "Noviye Izvestiya" of 28 January, more than 70 soldiers have been killed by fellow servicemen since April 1995. BP


A city court in Neftekamsk (Republic of Bashkortostan) on 26 January shut down the local newspaper "Vechernii Neftekamsk." Bashkortostan's Ministry on the Press and Mass Media filed the lawsuit, claiming that the newspaper has repeatedly published false information about the republic's leaders. In an interview with RFE/RL's Moscow bureau on 28 January, Eduard Khusnutdinov, the founder and editor of "Vechernii Neftekamsk," said his newspaper has been persecuted for criticizing the republic's authorities. For example, it is imported from neighboring Udmurtia, because no type-setter in Bashkortostan will print it. Khusnutdinov added that Bashkortostan's media law, which the court cited in its decision to close "Vechernii Neftekamsk," violates federal legislation and the Russian Constitution. "Kommersant-Daily" reported on 16 January that Khusnutdinov is running against local businessmen in a by-election for a State Duma seat in February. LB


Some 1,000 people staged a demonstration in Ulyanovsk on 27 January demanding an end to "persecution" of local journalists, RFE/RL's correspondent in Ulyanovsk reported. The newspaper "Simbirskie gubernskie novosti" organized the rally, which was supported by other publications that oppose the oblast administration. Since he won a December 1996 election, Ulyanovsk Governor Yurii Goryachev has filed numerous libel lawsuits against media that have criticized him or portrayed the situation in the oblast in an unfavorable light. He has repeatedly won such lawsuits, even when the offending article did not mention Goryachev's name. Journalists say they are denied access to basic information about the Ulyanovsk administration. Meanwhile, the oblast provides some 8 million rubles ($1.3 million) annually in subsidies to loyal media. Speakers at the 27 January rally urged the federal authorities to guarantee equal rights for all publications in Ulyanovsk. LB


Vitalii Ponurov, the chairman of the Chelyabinsk Oblast State Television and Radio Company, recently ordered that any news reports on top officials in Chelyabinsk must be cleared by the company's first deputy chairman, Boris Durmanov, "Kommersant-Daily" reported on 28 January. Most local media in Chelyabinsk have provided friendly coverage to Governor Petr Sumin and his administration since Sumin was elected in December 1996. A rare exception was a recent radio report quoting a local human rights defender, who sharply criticized Chelyabinsk Premier Vladimir Utkin. Four days later, Ponurov issued the order that in effect establishes prior review censorship at state-owned radio and television in the oblast. In most Russian regions, state-controlled electronic media offer largely or exclusively favorable coverage of the regional authorities. Article 29 of the constitution prohibits censorship, but that ban has not been enforced. LB


National Democratic Union Chairman Vazgen Manukyan told journalists on 28 January that his party is currently holding talks with other opposition forces on how to mobilize public pressure on President Levon Ter-Petrossyan to force him to step down, Noyan Tapan and RFE/RL's Yerevan bureau reported. Manukyan reiterated that Ter-Petrossyan is the key obstacle to a just solution to the Nagorno-Karabakh conflict and the democratization of Armenia. He said his own views on how to resolve the Karabakh conflict are identical with those of the Karabakh leadership. Manukyan also said that the war is unlikely to resume because "Azerbaijan would lose it on the same day it starts it," adding that he believes a negotiated settlement of the conflict is still possible. LF


In an interview carried by Noyan Tapan on 28 January, Babken Ararktsyan played down the discord within the country's leadership over how best to resolve the Karabakh conflict. Arakstsyan conceded that the Karabakh conflict has generated internal tensions, but he denied that those tensions constitute a "crisis." He reaffirmed the commitment of the ruling Armenian Pan-National Movement to the de facto independence of Karabakh, to security guarantees for the Karabakh population, and to the ongoing peace talks under the aegis of the Organization for Security and Cooperation in Europe. Ararktsyan said he does not think the attacks earlier this month on three senior officials are capable of "jeopardizing internal stability," hinting that the parliament will not demand the government's resignation. LF


Addressing the parliament of the unrecognized Nagorno-Karabakh Republic on 28 January, Arkadii Ghukasyan, the enclave's president, again argued that the "phased" peace plan proposed by the OSCE Minsk Group co- chairmen is "dangerous" for Karabakh because it stipulates a withdrawal of Armenian forces from occupied Azerbaijani territory before a decision on the enclave's future status. He commented that the proposal thus means Azerbaijan has no incentive to make concessions, Noyan Tapan and RFE/RL's Stepanakert correspondent reported. Ghukasyan pointed out that the "phased" plan increases the chances that hostilities will resume because it destroys the existing balance of military forces. But he also stressed that he does not reject the so-called "consolidated" approach to peace talks, which entails first resolving the issue of Karabakh's status vis-a-vis Azerbaijan and then holding talks on other issues. LF


Azerbaijani Foreign Minister Hasan Hasanov told Interfax on 28 January that his country's future relations with both Russia and the CIS are contingent on Moscow's position on resolving the Karabakh conflict and on whether it insists that Armenia return the weaponry it received illegally from Russia from 1993-1996. Hasanov said that Moscow is to blame for the difficulties that have arisen in resolving the Karabakh conflict because of its policy of supplying arms to Armenia and the agreements on military cooperation that it has concluded with Yerevan. LF


A convey of six trucks belonging to the Group of Russian Troops in the Caucasus was detained on 28 January at the Georgian-Armenian frontier, Caucasus Press reported the next day, quoting the Georgian Ministry of National Security. The trucks were loaded with ammunition and weapons and were headed for Armenia on orders from the Commander of the Group of Russian Forces in the Caucasus Lieutenant-General Viktor Kazantsev. They were forced to turn back. LF


Georgian presidential foreign policy adviser Archil Gegeshidze told journalists on 28 January that Ankara is trying to convince Tbilisi of the merits of the Baku-Ceyhan route for the main export pipeline for Azerbaijani (and possibly also some Kazakh) Caspian oil, Interfax and Caucasus Press reported. Gegeshidze, who held talks with visiting Turkish Deputy Foreign Minister Mohammed Ali Irtemcelik on 28 January, said that construction of a Baku-Ceyhan pipeline would not detract from the importance of the pipeline from Baku to the Georgian Black Sea port of Suspa, scheduled to begin operations this fall. He added that he and Irtemcelik also discussed possible Russian participation in the export of Caspian oil via Turkey since "the isolation of Russia is in nobody's interests." LF


Kazakhstan has set up a Foreign Intelligence Service, ITAR-TASS and Interfax reported on 28 January. Major-General Zhenis Ryspayev, who will head the service, said the new agency does not intend to spy on other countries but will coordinate activities with the special services of CIS states. He added that the new service, who is directly subordinate to the president, will monitor the activities of extremist religious groups, drug smugglers, and mafia groups in order to assess potential threats from foreign terrorist groups. BP


Also on 28 January, Ryspayev denied press reports from abroad that Kazakhstan has sold SS-20 or SS-21 missiles to Iran, ITAR-TASS and Interfax reported. Ryspayev said sales of any weapons "are so closely monitored...that it's practically impossible to [carry them out] secretly." He added that with the help of the U.S., Kazakhstan became a nuclear-free state in 1995 and has not produced any missiles since then. BP


Ukrainian President Leonid Kuchma met with Turkmen President Saparmurat Niyazov in Ashgabat on 28 January. Niyazov promised to resume supplies of natural gas to Ukraine this year, even though Ukraine still owes about $600 million for earlier supplies. A dispute between Ashgabat and the company contracted to deliver the gas to Ukraine, Turkmenrosgaz, led to suspension of deliveries last March. Niyazov said his country will ship 15 billion cubic meters of gas to Ukraine but added that the delivery depends neither on Ashgabat nor on Kyiv." The pipeline bringing gas from Turkmenistan to Ukraine runs through Russia. Kuchma is scheduled to meet with Russian President Yeltsin in Moscow on 30 January. BP


CIS Executive Secretary Ivan Korotchenya told Interfax on 28 January that the next CIS summit will be held on 19 February in Moscow. Following the cancellation of the summit scheduled for mid-January, it was announced earlier this month that the next summit will take place in late March. According to Korotchenya, the top item on the agenda will be reforming the administrative structure of the CIS and developing trade between its members. LF


Two journalists working for Russian Public Television (ORT) have been found guilty of illegally crossing the Belarusian border last summer and have received suspended sentences, Reuters reported on 28 January. Journalist Pavel Sheremet received a two-year sentence and his cameraman, Dmitriy Zavadsky, an 18-month term. The sentences are suspended for one year and will be waived altogether if the defendants commit no crimes during that period. The arrest last July of the two men strained Russian-Belarusian relations. The Russian daily "Nezavisimaya gazeta" called the verdict a compromise, while observers believe it allows Belarusian President Alyaksandr Lukashenka to save face while not damaging relations with Moscow. Defense attorneys said they will appeal the verdict. PB


The Information Ministry on 28 January banned the opposition daily "Pravda Ukrainy" citing a registration irregularity, Reuters reported. Information Minister Zynoviy Kulyk said the newspaper was registered last July as a joint-stock company in which 76 percent is listed as belonging to an Antiguan group and 34 percent to a Ukrainian group. Kulyk said because the total is 110 percent, the newspaper's registration is illegal. "Pravda Ukrainy" was the Communist Party daily until 1991. It often published interviews with former Premier Pavlo Lazarenko, who was sacked by President Leonid Kuchma last summer. The newspaper said it will file a court case against the Information Ministry for the ban. PB


Ukrainian Justice Minister Suzanna Stanik presented the ratification instruments of a European convention on the protection of minorities to the Council of Europe on 28 January, dpa reported. In joining the convention, Kyiv must promote minority culture and languages in schools, the media, and public life. Members of the convention also pledge not to forcibly assimilate minorities. Some 22 percent of Ukraine's 51 million population are ethnic Russians, and there are also very small minorities of Belarusians, Moldovans, Bulgarians, and Poles, among others. PB


Vasyl Kravchenko, Ukraine's chief military prosecutor, said on 28 January that there were 107 cases of suicide in the armed forces last year, Interfax reported. He added that five others died as a result of hazing incidents. Kravchenko reported the statistics in the wake of an incident whereby a soldier shot dead two servicemen before killing himself. The man was ruled to have suffered "permanent psychological damage" as a result of hazing. PB


Prime Minister Mart Siimann on 28 January sacked Robert Lepikson for his public attacks on other cabinet ministers, BNS and ETA reported. The most recent of those attacks came two days earlier, when Lepikson published an article in "Eesti Paevaleht" sharply criticizing Foreign Minister Toomas Hendrik Ilves's decision to join the extra-parliamentary Farmers' Party. President Lennart Meri, who under the constitution formally appoints and dismisses ministers, agreed to Lepikson's dismissal and appointed former banker Olari Taal to replace him. Taal, an independent, was the chairman of Hoiupank from 1993 to 1997 and held the construction and economics portfolios in a previous government. Lepikson, meanwhile, has said he was sacked not because of his criticism of cabinet members but because of his crackdown on crime. He commented the results of several probes may have been "an unpleasant surprise to quite a few people." JC


Responding to an article in the 28 January "Diena," Guntars Krasts said it is difficult to say whether the failure to conclude a contract on Russian gas supplies to Latvia prompted Russian Premier Viktor Chernomyrdin's "reluctance" to hold talks with Krasts during the Baltic Sea Council meeting in Riga last week, BNS reported. Latvian Prime Minister Guntars Krasts underscored that the proposed agreement, which reportedly would grant privileges to Russia's Gazprom, was disadvantageous to Latvia. He added that he had rejected the deal when he was economics minister in the previous government. Chernomyrdin was expected to meet with his Latvian counterpart last week but held talks only with President Guntis Ulmanis. On 26 January, Ulmanis sharply criticized Krasts for failing to make use of the opportunity to meet with the Russian premier. JC


Before leaving for the World Economic Forum in Switzerland, Polish Finance Minister Leszek Balcerowicz said his country is fundamentally stronger than most other emerging markets, Reuters reported on 28 January. Balcerowicz will attend the conference with President Aleksander Kwasniewski. Balcerowicz pointed to Poland's high economic growth, estimated at more than 6 percent last year and expected to reach 5.6 percent in 1998. He added that investors could "distinguish healthy tigers from sick tigers." PB


Josef Tosovsky's cabinet on 28 January won a confidence vote in the Chamber of Deputies after pledging to meet the Social Democratic Party's (CSSD) main demand that it submit within eight weeks a timetable for its privatization program, CTK reported. The vote was 123 to 71. Earlier, CSSD deputies had proposed that the confidence vote be postponed "indefinitely." President Vaclav Havel welcomed the vote in the legislature, saying it indicated that "the period of instability of the last two months is essentially over." MS


Miroslav Sladek, the leader of the far right Republican Party, on 28 January appealed to the Constitutional Court to rule on the legality of Havel's election as president earlier this month. Sladek claims his constitutional rights were violated because he was imprisoned during the vote and that Havel's election by a one-vote margin was only possible because of Sladek's absence. He demands that the president be prevented from taking the oath before the court rules on the matter. MS


Michal Kovacs on 28 January told an audience of scholars, experts, and reporters in Washington that the problems hindering his country's membership in NATO are "temporary" and will be overcome, an RFE/RL correspondent reported. He said the Slovaks are genuinely devoted to democratic values and are aware that good relations with neighboring countries are a "basic requirement for becoming part of the new Europe." Kovacs said the priority for Slovakia must be the elimination of a "certain deficit in democracy" and renewing full trust between itself and the U.S. The Slovak parliament is to elect a new president on 29 January, but observers say the legislature may be unable to elect the new head of state before the September parliamentary elections. MS


The Slovak Council for Radio and Television on 28 January renewed RFE/RL's license but, as in the past, did so for only two years instead of the possible maximum of six years. RFE/RL Slovak Service Director Miroslav Novesky said "we are satisfied that the council made this decision, although we would have been glad to have received a license for more than two years," CTK reported. The council also decided that the private radio station Twist, which is often critical of the government, will be given a frequency in the Kosice region of eastern Slovakia, which means that the station will broadcast to more than half of the country. MS


President Arpad Goncz on 28 January announced that the first round of general elections will be held on 10 May and the second round on 24 May, Hungarian media reported. The decision came after Goncz's meeting last week with the leaders of all the 11 parties that gained at least 1 percent support in the 1994 general elections. MSZ.


Representatives of Hungary's German, Croatian, and Slovak minorities have applied to register an alliance called the Nationalities Forum, "Magyar Hirlap" reported on 29 January. Mihaly Jozan-Jilling, representative of the German minority, said the minorities cannot wait for the parliament to make a decision on their parliamentary representation (see "RFE/RL Newsline," 28 January 1998) and therefore will form an election alliance based on ethnic criteria. The Romanian and Romani minorities will decide later whether to join the alliance. Meanwhile, Foreign Minister Laszlo Kovacs warned against any further delay in passing legislation on parliamentary representation for ethnic minorities, noting that Hungary's international reputation and credibility is at stake. MSZ


Serbian police shot and wounded an ethnic Albanian teenager in Kosovska Mitrovica on 28 January, an RFE/RL correspondent reported from Pristina. In Kosovo Polje, Serbs in civilian clothes beat Albanian high school students, sang nationalist songs, and damaged the building housing the private school. A similar incident took place in Ljipljan. Police sealed off a village near Decani, fired machine guns at unspecified targets, and beat several male villagers. Meanwhile, police stepped up patrols in Pec, Malisevo and Klina the Belgrade daily "Danas" wrote. PM


Some 2,000 Serbs demonstrated in Zvecan,. near Kosovska Mitrovica, on 28 January to protest what they called "Albanian terrorism and separatism." Speakers also denounced Belgrade's policies, which they say have led to the current tensions in Kosovo. The son of a Serbian politician killed by Albanians the previous week told the crowd that the Serbian authorities "must protect every Serb, every Serbian home, from Albanian separatism and terrorism" (see "RFE/RL Newsline," 26 January 1998). Another speaker said that the current "terrible situation" has been brought about by "those who lead this country [but] have no answer to the [Albanian] separatist strategy." The speaker added, however, that Serbs should "be dignified and show the world that we are the victims, not those who kill us." PM


The Council of Europe's parliamentary assembly passed a resolution in Strasbourg on 28 January condemning "Serbian repression of the ethnic Albanian population of Kosovo." The resolution said that Belgrade's policies have "led to armed resistance" in the region. The text added that Yugoslavia is itself to blame for its continued international isolation and that, if Belgrade wants to rejoin the international community, it must implement constitutional reforms guaranteeing freedom of the press, an independent judiciary, and protection of basic civil rights. A Yugoslav delegation in Strasbourg asked that references to Kosovo be dropped on the grounds that the province is the internal affair of Serbia, but the assembly ruled that human rights violations cannot be considered solely one country's internal affair. PM


A bomb destroyed the car of Darko Rapopovic, a top police official, in Podgorica in the night of 26-27 January, an RFE/RL correspondent reported from Podgorica on 28 January. A bomb demolished the car of the commander of special police forces in Podgorica on 24 January (see "RFE/RL Newsline," 26 January 1998). The previous week, police forces prevented demonstrators loyal to outgoing President Momir Bulatovic from disrupting the inauguration of reformist President Milo Djukanovic. PM


Belarusian President Alyaksandr Lukashenka arrived in the Serbian capital on 28 January for talks with Yugoslav officials, AFP reported. Lukashenka said he hoped to "expand and deepen cooperation" between the countries, which, he said, have "common historic roots and warmest friendly bilateral relations." The two countries signed a friendship treaty last year. Lukashenka is the first leader of a former Soviet republic to visit Belgrade. He is to meet with Yugoslav President Slobodan Milosevic and other officials. PB


Parliamentary speaker Dragan Kalinic of Radovan Karadzic's Serbian Democratic Party agreed at a meeting of representatives of Bosnian Serb political parties in Bijeljina on 28 January that the 31 January session of parliament will take place in Banja Luka, which is President Biljana Plavsic's stronghold. Kalinic and other Karadzic loyalists had wanted the meeting to be held in the small but politically neutral town of Teslic. Prime Minister Milorad Dodik, a supporter of Plavsic, told RFE/RL on 26 January that the hard-liners have become more cooperative in recent days because of pressure from Belgrade (see "RFE/RL Bosnia Report," 28 January 1998). PM


Prime Minister Zlatko Matesa said in Zagreb on 28 January that there will be no devaluation of the kuna, which currently trades at roughly one to $6. He added that the stability of the kuna is a cornerstone of the government's economic policy and that the authorities will continue their tight money policy in 1998. Matesa said the government does not want to undermine citizens' confidence in the kuna and the value of their savings. Many foreign experts consider the kuna overvalued by at least 20 percent; they expected that the government would devalue it in order to boost exports. Matesa, however, said that the government will not devalue the currency in order to help some businesses solve what he called their "internal problems." PM


A spokesman for the Association of Victims of the 1941-1945 Occupation said in Ljubljana on 27 January that his organization demands $1.2 billion from the German government on behalf of some 45,000 Slovenes. The spokesman stated that the money represents reparations for "internees, refugees, abducted children, forced laborers, prisoners-of-war, and those who died in concentration camps or who were murdered" during World War II. He added that the association will also press claims against Italy and Hungary, which, together with Germany, occupied Slovenia during that war. PM


A spokesman for the French auditing company Deloitte & Touche said in Tirana that the VEFA investment company has only $7 million in assets and that it has only a small income from its business activities, "Koha Jone" reported on 28 January. VEFA is believed to have received more than $300 million in recent years from some 90,000 investors. The spokesman for the French firm, which has an Albanian government contract to audit the records of the last surviving pyramid scheme, added that VEFA is losing $200,000 a month because of poor management. He also said the French company is investigating recent Albanian media reports that VEFA owner Vehbi Alimucaj has $40 million in bank accounts in Greece. FS


Foreign Minister Paskal Milo said in Tirana after returning from Brussels on 28 January that the EU and the Albanian government have agreed to start constructing an east-west highway in March. The EU is providing $165 million for the project, which will eventually link Durres with Istanbul. Elsewhere, a group representing Italian investors has expressed concern for the safety of foreign businessmen following the killing of an Italian shoe- factory owner in Tirana on 27 January. Italians have launched some 200 small and medium-sized businesses in Albania, far more than any other nationality. And in Kukes, gunmen attacked an arms depot on 28 January, "Koha Jone" reported. A shoot-out continued for hours before the unidentified attackers withdrew. FS


Following talks between President Emil Constantinescu and the leaders of the coalition parties on 28 January, the presidential office released a statement the next day saying the participants "take note" of the decision of the Democratic Party to withdraw its ministers from Victor Ciorbea's government. However, the Democrats will continue to support the coalition in the parliament. A new protocol on how the coalition will function under the new conditions is to be drawn up by 2 February. The coalition leaders agreed to work out a program for accelerating reform and improving cooperation among its parliamentary deputies. They also agreed to "refrain from public declarations likely to produce tensions among the coalition members." MS


Prime Minister Ciorbea on 29 January said he will announce the new composition of the government on 2 February. Taking into consideration what he called Romania's "vital interests," President Constantinescu has asked Defense Minister Victor Babiuc and Foreign Minister Andrei Plesu to stay in the government. Babiuc has said he will quit the defense portfolio. Democratic Party Deputy Chairman Traian Basescu said his party is agreed that Plesu, an independent nominated by the Democrats, should stay on as foreign minister. MS


The Transdniester authorities are threatening to send armored cars into the security zone if Chisinau does not revoke the appointment of police Colonel Vitalie Bruma to the Joint Control Commission, BASA-press and Mediafax reported on 28 January. The separatists claim that by appointing Bruma as a member of the commission, which is overseeing the truce, President Petru Lucinschi wants to block that body's activities. Moldovan presidential counselor Anatol Taranu said that the separatists themselves are using the appointment of Bruma as a "pretext" for blocking the commission's work. Tiraspol opposes Bruma's appointment because he claimed in media interviews that the separatists are producing military equipment. MS


Wolfgang Schussel said in Sofia on 28 January that his government is trying to establish whether money was illegally transferred from Bulgaria to private bank accounts in Austria, an RFE/RL correspondent reported. He said bank secrecy laws hamper the investigations. There are suspicions that former members of the Bulgarian communist nomenklatura who later became businessmen had secretly transferred funds to Austria in the 1980s. Ivan Kostov's cabinet has said that former Communists illegally funneled thousands of millions of dollars from state funds into private bank accounts in Vienna. MS


by Michael Wyzan

At a seminar organized by the Vienna Institute for Comparative Economic Studies on 22 January, George Kopits, assistant director of the IMF's Fiscal Affairs Department, discussed the requirements that countries acceding to the EU will have to meet and the policy issues facing them.

On balance, he was upbeat about the ability of the five postcommunist countries invited by the European Commission in July 1997--the Czech Republic, Estonia, Hungary, Poland, and Slovenia--to meet those requirements. Indeed, in many important respects, they are ahead of Greece and the Iberian countries as they prepare for accession.

Those countries will have to adhere to "ERM2" for two years before adopting the euro. That is, they must use the exchange rate mechanism currently followed by most EU members before the euro is introduced next year. That means keeping their currencies at a parity to the euro with a 15 percent corridor in each direction.

The countries slated for accession may also have to meet the various "Maastricht criteria" (including a budget deficit no larger than 3 percent of GDP). It is safe to assume that they will need to adhere to such institutional requirements as using market-based monetary instruments and maintaining central bank independence from political influences.

Other tasks include eliminating all trade barriers with the other EU members; establishing the common external tariff; and implementing common procedures for consumer and environmental protection, public procurement, banking regulation, and tax harmonization.

As a benefit, the five countries will have access to the Structural Funds (SF), the Cohesion Fund (CF), and perhaps to the Common Agricultural Policy (CAP). While the transfers potentially allocated to them could be enormous according to current criteria, it seems likely that the amount available to them will be limited to 4 percent of GDP.

The five countries seem to be doing rather well in meeting those criteria. Inflation and long-term interest rates have come down, although they remain above the EU averages. There is progress on adopting market-based monetary tools and establishing central bank independence. Budget deficits in several countries already fulfill the Maastricht criteria, although there may be significant extrabudgetary and quasi-fiscal expenditures. Their external sectors are already liberalized, and there is progress on antimonopoly and consumer-protection legislation.

However, much remains to be done in the areas of environmental standards, banking regulation, harmonization of indirect taxation (especially rates of value-added tax and payroll contributions), and procurement procedures.

It is unclear is whether the countries acceding to the EU will be able to operate within ERM2, given the myriad pressures on their exchange rates. There are factors that may lead to the appreciation of their currencies, including foreign direct investment and short-term capital inflows, and the productivity-driven adjustment of their prices to the levels of their EU neighbors. But there are also pressures for depreciation. Growth of wages tends to exceed that of labor productivity; budget deficits and rapid monetary growth persist; and speculative capital occasionally flows out.

Another issue is whether the countries can remain within the EU's fiscal guidelines while dealing with major structural challenges. Accession will bring some budgetary advantages, including transfers under the SF, CF, and CAP programs; the elimination of sectoral subsidies; reform of budgetary practices; and lower interest costs.

At the same time, accession will also pose budgetary challenges, such as the need to co-finance the transfer programs (such as the SF, CF, and CAP) and make national contributions to the EU budget, eliminate tariffs against imports from EU members, and adopt the common external tariff. Those countries will also have to provide for tax harmonization, which will force major reductions in VAT rates; adopt EU accounting practices; and incur restructuring costs, especially for investments in the infrastructure.

Despite such challenges, Kopits is generally optimistic about the outcome of accession. The process has been successful in Spain and Portugal, although less so in Greece. The five postcommunist countries have many similarities with the three Mediterranean ones at the time of their accession: low income levels, low productivity, a need for enterprise restructuring, and scope for infrastructure investment.

Many differences between the transition and Mediterranean countries suggest the former have more advantages than did the latter: they are more open to foreign trade and capital movements (especially than was the case of Spain and Greece), have smaller macroeconomic imbalances, and, ironically, have less widespread state ownership following their privatization efforts. However, the enlarged EU will be different from the European Community of the 1980s, particularly since the community was a customs union only, not a single market, and did not have a common monetary policy.

In the author's view, the five countries seem better prepared for accession than many observers realize. There is more doubt about the viability of upcoming changes to the EU's functioning--especially the single currency and reform of the transfer programs--than about the ability of those countries to adopt current procedures. The author is an economist living in Austria.