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Newsline - June 5, 1998


In his weekly radio address, Russian President Boris Yeltsin said on 5 June that the crisis on Russia's financial markets has been "defused" but that the government and Central Bank must continue to take measures to preclude further destabilization, Russian agencies reported. Yeltsin said that federal, regional, and local governments must learn to live within their means, use budget funds rationally, and stop accumulating debts. He warned that tax policy "must become as tough as possible" and that tax-evaders will be prosecuted, noting that failure to collect taxes means that public sector wages cannot be paid. LF


After two days of rebounding from the earlier sell-off, the main Russian stock market index closed down 0.22 percent on 4 June, Russian agencies reported. Shares in Gazprom lead the market, rising 13.7 percent after climbing 20.2 percent the day before. The ruble also fell slightly against the dollar from 6.16 to 6.17. On 5 June, the Central Bank reduced its refinancing rate from 150 percent to 60 percent. PG


In an interview with the 4 June "Kommersant-Daily," First Deputy Prime Minister Boris Nemtsov argued that the financial crisis of the previous week was "prompted by the budget deficit." He added that the government's attempt to reduce expenditures and increase revenues should have been made two years ago. Nemtsov excluded the possibility of the government raising loans from Russia's oligarchs rather than seeking them abroad, saying that the Russian business tycoons "do not have that much money, they simply act like they do." But Finance Minister Yakov Urinson offered a different explanation for the crisis in an interview with "Noviye izvestiya" published the same day. Urinson said the crisis was the combined result of several adverse trends, including the government crisis, the coal miners' strikes, the southeast Asian economic crisis, a weak export structure, and lack of confidence among foreign investors. LF


Russian Prime Minister Sergei Kirienko won support from the French government for his reform program but said he has not asked for or received any additional aid, Interfax reported on 4 June. Kirienko said the situation in Russia is stabilizing "smoothly and reliably" and that Moscow does not need any financial assistance. Following two days in Paris, Kirienko departed for Crimea to participate in a summit of Black Sea states. PG


Foreign Minister Yevgenii Primakov on 4 June said that the "joint stance" of the five permanent members of the UN Security Council on recent nuclear tests by India and Pakistan represents a major achievement, ITAR-TASS reported. Primakov's comments came immediately before the five's foreign ministers were to meet in Geneva on this issue. Also on 4 June, Russia pledged to provide the International Atomic Energy Agency with more information on Russian nuclear plants that export to non-nuclear countries, Interfax reported. PG


After voting down a move to cancel hearings on the arms control accord, the State Duma agreed on 4 June to postpone them from 9 June to 16 June in order to meet with senior military and Foreign Ministry officials who will be out of town on the earlier date, ITAR-TASS reported. Duma speaker Gennadii Seleznev warned that the hearings could still be canceled if U.S. President Clinton continues to demand that Russia ratify the treaty as a precondition for his visit to Moscow. PG


President Yeltsin on 4 June vetoed a land code passed by the Duma that would have made most private real estates deals illegal, Interfax reported. He said that its provision violates the constitution. In a related move, the government on 4 June asked the Constitutional Court to nullify a Duma bill that would prevent foreigners from owning more than 25 percent of power companies in Russia. This step came even as some Duma members indicated that they are willing to consider eliminating the 25 percent restriction from the legislation. PG


Presidential spokesman Sergei Yastrzhembskii has said that Yeltsin wants "more balanced" coverage of developments in Russia but that he is not opposed to "freedom of expression," including criticism of himself, ITAR-TASS reported on 4 June. "There are invisible threads between the president and the mass media, a very reliable umbilical cord," Yastrzhembskii added. Meanwhile, at a conference devoted to the creation of a state transmission monopoly, Mikhail Seslavinskii, the chairman of the Russian television and radio broadcasting service, said "the state has the right for information flows as powerful as private corporations have." And Russian Deputy Prime Minister Oleg Sysuev said the government wants a structure that would allow the state to compete successfully on the information market. However, Kemerovo governor Aman Tuleev released a statement saying he will challenge those plans in court. PG


In a bid to persuade ordinary people to pay their taxes, Russia's new tax chief Boris Fyodorov released a statement on 4 June saying his service will target 1,000 prominent Russians for special audits, Russian agencies reported. In a related development, Prime Minister Kirienko said in Paris on 4 June that he expects the Duma to give preliminary approval to a new tax code before taking its summer recess. But he also stressed that taxes would be determined until that time by presidential decrees, ITAR-TASS reported. PG


Leonid Fedun, LUKoil's vice president, told Interfax on 4 June that Russia should not join OPEC unless Kazakhstan, Azerbaijan, and Turkmenistan become members at the same time. He explained that those countries "will take over the markets we may leave" if Russia were forced to cut its exports to conform to OPEC limits. PG


Kadzuya Natsukawa, the chairman of Japan's joint Chiefs of Staff, told ITAR-TASS on 4 June that Moscow and Tokyo are expanding military cooperation in order to improve security in the Asia-Pacific region. But he added that Japan currently has no plans to buy any of Russia's Su-27 combat planes. In another military development, Russia on 4 June conducted its first-ever joint exercise with the British Navy in the Baltic Sea. PG


The Russian Foreign Ministry on 4 June expressed concern about renewed fighting in Afghanistan, Interfax reported. But the same day, Foreign Ministry deputy spokesman Valerii Nesterushkin said Moscow is pleased by Tajikistan's decision to establish a commission including representatives of the government, the parliament, and the opposition to work out a law on political parties. PG


Secretary-General of the Association of South East Asian Nations (ASEAN) Rodolfo Severino praised Russia on 4 June for its role in the organization, saying "thanks to Russia a certain balance of forces has been created in the Asian Pacific region," ITAR-TASS reported. Severino's comments were made one day after ASEAN held its first conference in Moscow, which addressed, among other issues, the southeast Asian financial crisis and nuclear testing by Pakistan and India (India and Russia are two of the "dialogue partners" of the nine-member association). ASEAN is to ask the five recognized nuclear states to persuade Pakistan and India to sign the Non-Proliferation Treaty. ITAR-TASS on 3 June quoted Russian Deputy Foreign Minister Grigorii Karasin as describing ASEAN as a "major pole in an emerging multi- polar world." BP


Oleg Mironov, the newly appointed human rights commissioner, told a press conference in Moscow on 4 June that Russia's human rights record is currently "awful," Western agencies reported. He noted that he will not push for an early ban on executions, despite Moscow's commitments. (Russian Prime Minister Kirienko issued a similar statement in Paris.) Mironov also complained that his predecessor, Sergei Kovalev, had left him with "no office, no personnel, and no documents." As a result, Mironov concluded , he will have to start work "from scratch." PG


In a bid to improve revenues from Russian property held abroad, the Russian government has decided to create a state-owned firm to manage such holdings, Interfax reported on 4 June. According to the State Property Ministry, Russia currently has more than 2,500 pieces of real estate in some 120 countries, not all of which are being actively used. PG


The Military Collegium of the Russian Supreme Court on 4 June refused to rehabilitate two Stalin-era secret police officials, People's Commissar for Internal Affairs Nikolai Yezhov and his deputy, Mikhail Frinovskii, Interfax reported. Both men, executed in 1940, were notorious for their role in Stalin's purges and show trials. PG


Moscow Mayor Yurii Luzhkov told Interfax on 4 June that the water supply in Moscow now conforms to "European and world standards." But he complained that residents are drinking too much of it, nearly twice as much as the per capita norm in European cities. That amount, he said, represents "an unaffordable luxury." Meanwhile, Chairman of the State Committee for Ecology Viktor Danilov- Danelian told Interfax that Moscow is one of 80 Russian cities that are environmentally unsafe. PG


Aman Tuleev told Radio Mayak on 4 June that Moscow is not keeping its promises to pay back wages to the Kuzbass coal miners, ITAR-TASS reported. But the Russian news agency reported that some 100 million rubles ($16.2 million) has been dispatched to that region over the past 10 days. Tuleev also announced plans to institute criminal proceedings against 50 local officials who, he said, were responsible for failing to pay local workers in the past. PG


"Discovery" docked with the "Mir" space station on 4 June in what is the last time that a U.S. shuttle will dock with the station. "Mir' is scheduled to be closed down early next year. The orientation system aboard "Mir" began functioning fully again on 1 June, after a computer problem had left the station drifting and jeopardized the docking with "Discovery." U.S. astronaut Andrew Thomas will return to Earth aboard the shuttle after more than four months on "Mir." Once undocked, the Discovery will travel alongside Mir to help locate a puncture in one of the station's Spektr modules. The puncture occurred last June when a cargo ship rammed into the station. BP


CIS Executive Secretary Boris Berezovskii returned from Tbilisi to Abkhazia for a second round of talks with Abkhaz President Vladislav Ardzinba in Gagra on 4 June, Russian agencies reported. Ardzinba told journalists that significant progress was made in preparing for a meeting between himself and Georgian President Eduard Shevardnadze, adding that "appropriate documents" will be drafted within the next few days. In Moscow, the head of the Russian Foreign Ministry task force that is mediating a settlement of the Abkhaz conflict said talks between the Georgian and Abkhaz special envoys are also making progress. But in Tbilisi, Georgian presidential adviser Levan Aleksidze said the Russian Foreign Ministry's rejection of a Bosnia-style peace enforcement operation in Abkhazia violates the document on additional measures for resolving the Abkhaz conflict adopted at the April CIS summit. LF


Meeting with President Heidar Aliyev in Baku on 4 June, U.S. Special Envoy to the Newly Independent States Stephen Sestanovich said Washington supports a multi-variant approach to the transportation of Caspian hydrocarbons to world markets, Russian agencies reported. At the same time, he ruled out routing any pipeline through Iran. U.S. Energy Secretary Federico Pena, speaking at the "Crossroads of the World" conference in Istanbul last week, fully endorsed the Baku-Ceyhan route for the Main Export Pipeline and pledged to try to secure U.S. funding for it. ANS-Press on 3 June quoted Turkish Energy Secretary Cumhur Ersumer as affirming that Turkey is ready to fund the Baku-Ceyhan project if Azerbaijan drops its insistence on retaining the decisive vote in managing the new pipeline company. LF


Speaking at a press conference in Baku pegged to the Fifth Caspian Oil and Gas Exhibition, Natik Aliev, the president of Azerbaijan's state oil company SOCAR, said Baku is currently assessing 11 export pipeline routes. He described the Iranian route as economically attractive but said that export via Bulgaria and Greece to the Mediterranean is also an option. Aliyev added that, in view of its superior quality, Azerbaijani oil could be refined in Ukraine, Bulgaria, and Romania. "Nezavisimaya gazeta" on 4 June reported that SOCAR and the Russian pipeline concern Transneft have concluded an agreement on the export of 9- 10 million metric tons of Azerbaijani oil from Baku to Novorossiisk when the current export agreement expires in 2001. LF


Kyrgyz Deputy Prime Minister Boris Silayev on 4 June announced that 3,500 residents of the Barskoon area on the southern shore of Lake Issyk-Kul will be evacuated to the northern shore, RFE/RL correspondents reported. The village of Barskoon is located near the scene of the 20 May spill of sodium cyanide into the Barskoon River. More than 1,000 people received medical attention in the week following the spill, and one woman died from cyanide poisoning. Residents of the southern shore are demanding the Kumtor gold mining operation, which is responsible for the spill, be shut down. Concerns have also been raised about the storage of 2,000 tons of sodium cyanide in the town of Balykchy, on the western shore of Issyk-Kul. Despite mounting evidence of a major environmental disaster, government officials continue to say it is safe to swim in the lake. BP


Kyrgyz President Askar Akayev, addressing a 4 June conference on "Improving the Election System in Kyrgyzstan," said he wants to abolish the requirement of at least 50 percent turnout for an election to be valid, Interfax reported. Akayev said the cost of holding run-off elections is too high and that he favors "winner-takes-all" elections. An amendment has been drafted and is expected to be submitted to the parliament later this year. BP


Miners continue to picket the buildings of the Presidential Administration, the Supreme Council, and the Cabinet of Ministers in Kyiv, Ukrainian Television reported on 4 June. Trade unionists have announced the pickets will remain until the authorities meet the coal miners' demands that all wage arrears be paid. Miners picketing the oblast administration building in Luhansk blocked the traffic in the city center for one hour. The Coal Miners Independent Trade Union said on 4 June that 45 mines are on strike, while the Ministry of Coal Mining put the figure at 30. Meanwhile, the parliament has passed a resolution ordering the government to increase subsidies to the coal industry by 400 million hryvni ($200 million). According to a government official quoted by ITAR-TASS, the government is now drafting a resolution on reducing coal imports from Russia and Poland. JM


The opposition daily "Kiyevskiye vedomosti" has lost a libel case filed by Interior Minister Yuriy Kravchenko, Ukrainian Television reported on 4 June. The court ruled that the newspaper has to pay 5 million hryvni ($2.5 million) in damages to the minister for falsely accusing him of corruption. In addition, two journalists are to pay the minister 27,000 hryvni in damages for writing "incriminating articles." "This is simply another attempt to stifle the independent press," a "Kiyevskiye vedomosti" representative told Ukrainian Television, adding that the newspaper will appeal the verdict in the Supreme Court. JM


The Chamber of Representatives, the lower house of the Belarusian legislature, has passed a bill that includes insulting, libeling, and slandering the president as criminal offenses in the penal code and defines the punishment for those who commit such offenses, Belapan reported. Submitting the bill to lawmakers, presidential administration chief Mikhail Myasnikovich said "encroaching on the honor and dignity of the president does harm not only to him but also to the prestige of the state and people as a whole." The bill provides for four years in prison, two years in a labor camp, or a fine for insulting the president. It also foresees penalties for using placards in public places or disseminating information in media that may be considered detrimental to the president's honor and dignity. JM


Parliamentary deputies from the Russian Party in Estonia, the Russian Unity Party, and the Estonian United People's Party have revived their six-strong parliamentary group, ETA reported on 4 June. The deputies were elected to the legislature on a joint electoral ticket, but the parliamentary group broke up in December 1996 owing to differences between the Russian Unity Party and the Estonian United People's Party. Valentin Strukov, a member of the revived parliamentary group, said that the Russian parties reached a "compromise that they must continue based on the principle of partnership." JC


After voting against considering amendments to the citizenship law as an urgent measure (see "RFE/RL Newsline," 3 June 1998), the parliament on 4 June approved the draft in the second reading by a vote of 57 to 16 with one abstention, BNS reported. The third and final reading of the bill is expected to take place before the parliamentary summer recess begins later this month. Lawmakers who voted against the draft were from the For Latvia party and the Fatherland and Freedom party. Under the amendments, which comply with OSCE recommendations, children of non-citizens born in Latvia after 21 August 1991 would automatically be granted citizenship if their parents requested it. Also on 4 June, "Diena" published a letter from British Prime Minister Tony Blair urging his Latvian counterpart, Guntars Krasts, to help ensure that Latvian law and practice "fully conforms with the standards of international society." JC


The leaders of the main opposition parties on 4 June agreed that if they succeed in ousting incumbent Prime Minister Vladimir Meciar from power in September, they will change the constitutional provision on presidential elections to elect the head of state by popular vote, Reuters reported. The leaders of the Slovak Democratic Coalition (SDK), the Hungarian Coalition, the Party of the Democratic Left, and the Party of Civic Understanding said after roundtable talks in Bratislava that they will not form any pre-electoral coalition and will compete independently in the elections. But SDK leader Mikulas Dzurinda said the roundtable was a "signal that the parties are close to each other on the main questions concerning the [country's] post-electoral direction." MS


Independent Smallholders' Party (FKGP) Chairman Jozsef Torgyan told Hungarian media on 4 June that his party will remain in opposition unless a "super- ministry" for developing the provinces is established and controlled by the FKGP. Torgyan's threat follows Federation of Young Democrats-Hungarian Civic Party (FIDESZ-MPP) leader Viktor Orban's statement the previous day that the countryside is not the "fiefdom" of any party (see "RFE/RL Newsline," 4 June 1998). Both Torgyan and FIDESZ-MPP Deputy Chairman Janos Ader confirmed that coalition talks between the two parties will not start until next week. In other news, after meeting with representatives of all parties that won parliamentary seats, President Arpad Goncz announced the inaugural session of the parliament will begin on 18 June. MSZ


The Decan region of western Kosova remains sealed off, as Serbian paramilitary and army forces continue assaults on ethnic Albanian villages, Western agencies reported on 4 June. Electricity and phone lines remain cut in the area, and reporters, international observers, and humanitarian workers are being kept out. Serbian officials said some 40 people, including two Serbian policemen, were killed in the latest operation, which, they added, rooted out fighters from the Kosova Liberation Army (UCK) and secured roads from Prishtina to Pec and from Pec to Djakovica. Several sources in Belgrade estimate casualties to be much higher, although no independent figures are available. Serbian forces are reported to be amassing near Glodjane and Jablanica, reputed to be a UCK stronghold. A Serbian provincial administrator in Kosova told B-92 radio in Belgrade that "talk of expelling people is speculation" and that ethnic Albanians have "cleansed entire villages" of Serbs. About 50,000 people are estimated to have been displaced by the military action. PB


Some 12,000 Kosovar refugees were reported to have entered northern Albania by 4 June, with another 7,000 entering Montenegro. Albanian Television reported on 4 June that over the past several days, only 4,000 refugees have officially registered in Albania. It appealed to all other refugees to do so. The UNHCR in Geneva said some 6,500 refugees had arrived in Albania by 4 June, but some Albanian media reports cite figures of up to 15,000. According to a Red Cross spokesman in Tirana, some 80 percent of the refugees are women and children and about half of them are under 15 years of age, "Koha Jone" reported. FS


German Foreign Minister Klaus Kinkel said NATO must decide quickly whether to send NATO troops to Albania to prevent the violence from spreading. Kinkel, speaking at a conference in Palermo, said the alliance's first option is to create a "cordon sanitaire." Kinkel warned Yugoslav President Slobodan Milosevic that once there, NATO troops could intervene in Kosova if the situation became "absolutely chaotic." Albanian Foreign Minister Paskal Milo, speaking at the Black Sea Economic Cooperation conference in Yalta, said Kosova is on the brink of an "open war" and that the West has given Milosevic more of a "carrot than a stick." PB


Russian Foreign Ministry deputy spokesman Valerii Nesterushkin told Interfax on 4 June that Russia has proposed that a UN force now operating in Macedonia should be used to monitor the border between Albania and Kosova. He added that the Russian government opposes the use of NATO troops because it "could set a dangerous precedent of using the alliance's troops outside the scope of the organization's activity, without authorization by the UN Security Council." PG


Ethnic Albanian leaders suspended talks with Serbian officials scheduled for 5 June, citing the recent Serbian offensive and the flight of refugees to Albania, Reuters reported. Fehmi Agani said the "escalation of force" is in "contradiction with the spirit of the talks." Serbian sources said the delegation from Belgrade will arrive in Prishtina as scheduled, despite the Kosovars' announcement. The U.S. envoy to the region, Robert Gelbard, said he will attempt to reinstate the talks so that the situation does not "unravel further." Kosovar Albanian shadow state President Ibrahim Rugova canceled a visit to various European cities and returned to Prishtina because of the worsening situation. PB


Milo Djukanovic told the Madrid daily "El Mondo" recently that if the federal Yugoslav army takes part in fighting in Kosova, he will request a Montenegrin parliament vote banning the participation of Montenegrin soldiers. Albanian Television quoted Djukanovic as saying that "I consider this a private war of [federal Yugoslav President Slobodan] Milosevic, and for his private wars, we will not sacrifice the lives of our Montenegrin soldiers." As of 3 June, some 150 Montenegrin soldiers had refused orders to go to the region since the current crisis began in February. FS


A 40-member team of NATO experts arrived on 4 June in Macedonia to assess the border situation there, AFP reported. Macedonian Defense Minister Lazar Kitanoski told reporters that NATO's presence in the country "would depend on the UN Security Council." The team is expected to travel to Albania in a few days, a Pentagon spokesman said. PB


Unidentified gunmen shot at a car carrying legislators Azem Hajdari and Vili Minarolli in the city of Bajram Curri on 3 June. The two lawmakers were unhurt, but another passenger, Bardhyl Pollo, the former director-general of Albanian Radio and Television, was injured. Also traveling in the car was the wife of former President Sali Berisha. "Rilindja Demokratike" said the Albanian government and the federal Yugoslav secret service were behind the attack, but "Gazeta Shqiptare" quoted unnamed observers as saying the gunmen were from an unspecified large northern clan that is fighting with the Hajdari clan for control over the city. FS


The World Bank approved a $63 million loan for Bosnia- Herzegovina on 4 June after the IMF approved the country's macroeconomic program, dpa reported. The money is to be used to reform public finances and help Bosnia keep up with foreign debts. Christian Portman, the World Bank director in Bosnia, said the loan marks the move from "reconstruction to consolidating institutions." PB


The U.S. State Department has suspended part of the "Train and Equip" program for the Muslim-Croat Federation army, dpa reported on 4 June. The Bosnian government refused to confirm that report, but diplomats are quoted as saying that the Bosnian Croats' refusal to accept joint state symbols, neutral license plates, or the integration of the Muslim-Croat police are the reasons for the stoppage. Officials are also upset with Bosnian officials' weak efforts in allowing non-Muslims to return to Sarajevo. Those parts of the program suspended are reported to include training of new soldiers and the allocation of military equipment. PB


Elementary and high- school teachers nationwide staged a one-day strike on 4 June to protest the government's refusal to raise their salaries. It was the second strike in two weeks and occurred during end-of-year examinations. Croatian government officials originally approved a 12.5 percent pay raise but then backed down on 3 June citing a lack of funds. Teachers unions are threatening to extend the strike if the government does not keep its pledge. PB


Bela Marko, chairman of the Hungarian Democratic Federation of Romania (UDMR), said on 4 June his formation will leave the ruling coalition if the parliament fails to approve during the current session demands that the UDMR had earlier agreed on with its partners. He pointed to amendments to the laws on education and local administration, as well as the setting up of a Hungarian-language university, RFE/RL's Bucharest bureau reported. Marko also criticized the slow pace of reform and the absence of a permanent coordination body where coalition party leaders could discuss differences. The UDMR chairman said his formation "is not engaging in blackmail but in a realistic assessment of the tasks ahead." MS


Sergiu Cunescu, leader of the Social Democratic Party of Romania (PSDR), said on 4 June that his party has "absolutely no intention" of leaving the government. The previous day, a spokesman for the Alliance for Romania (APR) party had urged to PSDR to take that move. Cunescu said that from the start, the agreement between the PSDR and the APR was on cooperation within the parliament and not on a merger between the two formations (see "RFE/RL Newsline," 4 June 1998). Meanwhile, Paula Ivanescu, deputy chairwoman of the Democratic Party, has told journalists that the Social Democratic Union, which her party and the PSDR formed before the November 1996 election, has "in practice" ceased to function, RFE/RL's Bucharest bureau reported on 4 June. MS


The Constitutional Court on 4 June ruled that the state must return property and assets confiscated from the country's royal family in 1947, AFP reported. The ruling comes as Princess Marie-Louise, sister of former King Simeon II, is paying a visit to her homeland. The assets include a palace in Sofia, a villa, the winter resort of Borovetz, three chalets, a farm,. and a house. In other news, 86-year-old former communist dictator Todor Zhivkov has been released from hospital, where he was treated for three weeks following a "diabetes crisis," dpa reported, citing the daily "24 Chasa." MS


by Michael Wyzan

Turkmenistan's GDP and exports are dominated by gas and cotton. Its largely unreformed economy has been more affected by developments on these markets than by the trends that usually characterize transition economies.

The lack of reform extends to the statistical authorities. The country publishes less economic data than any other CIS member. Even now, the CIS's Interstate Statistical Committee still has virtually no 1997 figures on Turkmenistan. That makes it difficult to figure out from abroad what is happening there; visiting the country is not particularly helpful either in identifying macroeconomic trends, as the author learned in April.

What data are available show GDP falling by about 25 percent in 1997. Turkmenistan should also should be experiencing a balance-of-payments crisis, having run up an approximately $250 million trade deficit and $600 million current account deficit last year (an enormous 32 percent of GDP) following many years of surpluses on both accounts. While imports contracted last year by about 50 percent to some $1 billion, exports fell by more than 55 percent to around $750 million.

However, there is little indication so far of any crisis. Construction continues day and night on a number of large infrastructure or "prestige" projects, such as a congress hall and an arch commemorating the country's neutrality. All such construction is carried out by foreign contractors, who must be paid in foreign currency, and makes uses of imported machinery. For a city with some 400,000 inhabitants, Ashgabat has an unusually large number of hotels, with restaurants serving imported food.

Most important, Turkmenistan has yet to agree to a reform program with the IMF, making it one of only two post-communist countries never to have done so (the other being Yugoslavia). Thus, there has been no lending from the IMF to support the balance of payments. Moreover, the absence of an IMF program means that the World Bank is unable to lend the country more than $100 million.

Despite the collapse in exports and GDP, certain other macroeconomic indicators were favorable in 1997: consumer price inflation (December-to-December) fell to 21 percent from 446 percent in 1996. The parallel market exchange rate (Turkmenistan maintained a multiple exchange rate system until April) was stable, while monetary policy was tight and the budget essentially balanced.

The large decline last year in GDP resulted chiefly from a collapse in gas exports. During the Soviet era, Turkmenistan exported about 70 billion cubic meters of gas annually; by 1997, this figure had fallen to 6.5 billion, down by 70 percent from 1996. Gas export revenues fell from $674 million in 1996 to $274 million last year.

The reason for last year's decline is clear: in March 1997, the government halted gas exports to its CIS partners--namely, Armenia, Georgia, and Ukraine-- because these countries had built up large arrears to it for earlier deliveries.

The larger, longer-term decline set in 1994, when a dispute with Gazprom resulted in the company's refusal to allow Turkmen gas into its pipeline for sale to European customers. The issues in dispute largely concern the price of the gas and the share of the payment that is to be made in currency (rather than by barter).

In any case, since a large amount of gas has not been paid for, the positive entry in the current account under gas exports has had to be netted out in the capital account. Last year, both the positive and negative entries fell, which meant that the decline in gas exports had a smaller impact on the balance of payments than would normally be the case.

Cotton production rose last year to 630 million tons, from 436 million tons in 1996, although it remains far below the Soviet-era peak of 1.4 billion tons. Even with the increase in production, however, cotton exports fell last year, when the harvest remained unsold due to a price disagreement with Turkish and Pakistani buyers.

Another factor restraining imports is the authorities' use of administrative methods to achieve precisely that end. Access to foreign exchange is severely restricted, with most such currency made available through auctions. And those wishing to import consumer goods are not ordinarily allowed to participate in those sales.

Finally, Turkmenistan has weathered its balance-of- payments problems partly because it has unusually large foreign reserves, amounting to almost $1 billion at the end of 1997. This is equivalent to 15 months of imports, easily the highest such figure in the CIS. These reserves even grew slightly in 1997.

Much of the reserves are directly under the president's control. If, as feared, the country registers another $500-600 million current account deficit this year, maintaining macroeconomic stability will depend on whether the president decides to release some of "his" reserves. This is a matter about which observers can only speculate. The author is an economist living in Austria.