MORE BAD NEWS ON RUSSIA'S FOOD FRONT
The Ministry of Food and Agriculture is forecasting lower output of almost all major farm commodities in 1998, Interfax reported on 15 October. The potato crop will be almost 12 percent smaller than last year and sugar beets 13.7 percent, while milk is expected to be down 3.2 percent; and meat and poultry sales 10.3 percent. As predicted earlier, this year's grain harvest is slated to be one of the worst in three decades, down 56 percent on last year. On 14 October, an official Russian delegation returned from a meeting at the U.S. Department of Agriculture in Washington, D.C. without making a formal request for food aid, Bloomberg reported. JAC
DUMA DEPUTIES TO FORM HUMAN SHIELD
An eight-member delegation of State Duma deputies left for Yugoslavia on 14 October. Sergei Baburin of People's Power faction, who is leading the group, told ITAR-TASS that the legislators would act as a human shield to prevent a NATO air strike. The military newspaper "Krasnaya zvezda" sounded a pessimistic note about the agreement reached between Yugoslav President Slobodan Milosevic and U.S. envoy Richard Holbrooke: the "probability that NATO will still inflict a limited missile strike...within the next few days or weeks remains great." The newspaper concluded that the fears Russia expressed during the preparation of the Russia-NATO Founding Act are now being confirmed. "The assumption was made even then that NATO was secretly considering the option of unfriendly behavior toward Russia." "Segodnya" quoted a military official and an arms exporter on 14 October as saying arms deliveries to Belgrade can easily be carried out even with the tight monitoring of Serbian territory and airspace by NATO. JAC
DUMA FAILS TO INCREASE ITS POWERS
The Duma failed to pass five amendments to the Russian Constitution on 14 October, four of which would have increased its powers at the expense of the executive branch. One amendment, which failed to pass by a narrow margin, would have introduced a permanent mechanism for the parliament to conduct investigations of the executive branch. Two other amendments would have given the Duma the power to dismiss key cabinet officials and the Federation Council more time to ratify laws passed by the Duma. The remaining two changes would have required the president to seek the Duma's consent both for the appointment of certain cabinet level officials and for initiating military action. Duma chairman Gennadii Seleznev told reporters that the Duma will establish a working group composed of various factions to draft new versions of the constitutional amendments. JAC
YELTSIN HEALTH CRISIS ABATES
The fevered examination of President Boris Yeltsin's health abated on 14 October after Yeltsin himself met with reporters and Prime Minister Yevgenii Primakov declared Yeltsin "absolutely fit to work." The same day, the Federation Council rejected a resolution calling for Yeltsin's resignation "voluntarily and immediately." On 15 October, the Constitution Court is considering the issue of whether Yeltsin is now serving his first or second term in office, since Yeltsin was elected president in 1991, when Russia was still part of the Soviet Union. The Russian Constitution was not adopted until 1993. According to the constitution, a president cannot serve for more than two consecutive terms. Yeltsin has said he does not intend to seek office for a third time. JAC
CHERNOMYRDIN FACING OUSTER...
Samara Governor Konstantin Titov told the "Frankfurter Rundshau" on 14 October that former Prime Minister Viktor Chernomyrdin would likely be removed from his post as chairman of the Our Home is Russia (NDR) party at an upcoming executive council meeting. Titov accused Chernomyrdin of betraying both the voters of Yamal-Nenetsk, where Chernomyrdin decided not to run for a Duma seat, and his fellow NDR members by allowing himself to be nominated a second time for prime minister without first seeking NDR council permission. Titov also said Chernomyrdin betrayed the Russian people by failing to act effectively as the economy collapsed. Chernomyrdin told reporters on 8 October that there is no split within the NDR, nor will there be one in the future. JAC
...WHILE LIBERAL PARTIES DEEMED 'UNPREPARED' FOR ELECTIONS
Commenting on all "liberal, social democratic, and centrist parties", "Izvestiya" on 10 October wrote that "reformers are not ready for upcoming Duma elections" either "morally or organizationally." The newspaper argued that earlier, Russia had two potential leaders of a reformist alliance, Chernomyrdin and Moscow Mayor Yurii Luzhkov. However, Luzhkov has opted for a left alliance, while Chernomyrdin's "position is all too shaky." Meanwhile, neither former presidential envoy to the IMF/World Bank Anatolii Chubais nor former Prime Minister Yegor Gaidar "could ever secure the support of the majority of the country" even if "the new government fails and empty shops and coupons result," "Izvestiya" remarked. JAC
BREZHNEV NAME TO RETURN TO POLITICAL SPOTLIGHT?
Andrei Brezhnev, the grandson of former Soviet leader Leonid Brezhnev, has announced his intention to recreate the stable times of his grandfather when there was "a middle class that received 200 rubles a month and had their own apartments and cars." Brezhnev, 37, told reporters on 14 October that his party, the All Russian Communist Movement, advocates the resurrection of "pure communism," drawing on the experience of former Soviet leaders Josef Stalin, Nikita Khrushchev, and Brezhnev. The party claims to have 5,000 members in 47 regions in Russia and plans to participate in parliamentary and presidential elections, "Komsomolskaya Pravda" reported on 15 October. According to the "Moscow Times," the grandson of Khrushchev received an offer to launch a new political party but declined to do so. JAC
YELTSIN CANCELS PURNEFTEGAZ SALE
Yeltsin has ordered the return of a 38 percent stake of Purneftegaz to its parent company, Rosneft, Interfax reported on 14 October. Purneftegaz had been sold for too low a price, according to the president's directive. Four companies, alleged to be closely affiliated with LUKoil, bought the Purneftegaz shares for $10 million in September, when Rosneft failed to pay back a loan to Mapo bank earlier in the year. "Kommersant-Daily" reported on 7 October that details of the sale had aroused the interest of the office of the prosecutor-general and that it might have been more accurate to value the shares higher, since the entire company is worth some $500 million. JAC
PENTECOSTALS IN PERM COME UNDER PRESSURE
Local authorities in the city of Osa, Perm Oblast, are pressuring a Pentecostal congregation to formally register as a religious organization, Keston News Service reported on 14 October. Under a 1997 law on religion, only "religious organizations" must be registered. The congregation considers itself a "religious group" and refuses to seek formal registration as a matter of religious principle. City and religious leaders view the matter differently. Arkhimandrite Veniamin Trepalyuk, for example, told Keston that legal ways to liquidate the "sect" have not yet been found but the local prosecutor-general has promised to resolve the matter. JAC
JEWISH OBLAST STRIKES OIL?
The oil exploration company Irkutskgeofizika believes it has discovered potential large oil deposits in the Jewish Autonomous Oblast, ITAR-TASS reported on 14 October. A local institute estimates that the unproven reserves amount to at least 100 million tons. According to Aleksandr Kuzin, deputy chief of the region's committee on natural resources, two exploration wells will be drilled later. The International Energy Agency reported that Russian crude oil exports fell 20 percent in September from August partly because Russian oil companies were unable to cover export fees after the collapse of the country's payment system. JAC
DEFEATED AZERBAIJANI PRESIDENTIAL CANDIDATES CHALLENGE POLL OUTCOME...
Speaking at a news conference in Baku on 14 October, Azerbaijan National Independence Party chairman Etibar Mamedov again rejected incumbent President Heidar Aliev's claims that he was reelected in the 11 October presidential poll with 75 percent of the vote, Reuters reported. Mamedov said that he polled approximately 35 percent of the vote and Aliyev received no more than 60 percent, despite massive falsification, thus failing to achieve the required two-thirds majority. Two other defeated candidates, Nizami Suleymanov and Ashraf Mehdiev, also rejected Aliev's claim to have polled two-thirds of the vote, while a fourth, Communist candidate Firidun Hasanov, claimed second place. Suleymanov also disputed the official estimate of turnout at 77 percent, claiming that it does not exceed 50 percent, according to Turan. Only the fifth challenger, Khanguseyn Kazymly, has accepted Aliev's victory claim as valid and characterized the poll as democratic. LF
...AS DOES OPPOSITIONIST BOYCOTTER
Former parliamentary speaker Rasul Guliev, one of five prominent opposition politicians who boycotted the elections, has condemned the election as undemocratic and the putative outcome as falsified, Turan reported on 14 October. He called on the international community to withdraw its support for Aliev. The five boycotters had issued a statement on 12 October condemning the way the elections were held, according to ANS Press. LF
ARMENIAN, RUSSIAN FOREIGN MINISTERS MEET
During talks in Moscow on 14 October, Vartan Oskanian and Igor Ivanov stressed the "full convergence" of their respective positions and approaches to the Caucasus region, RFE/RL reported. The two ministers described their continuing adherence to the comprehensive Russian-Armenian treaty signed two years ago as a "firm basis" for "rapidly developing" bilateral ties. They agreed to continue efforts to foster the OSCE's transformation into the major pillar of European security in the 21st century. And they also called for renewed efforts by the OSCE to end the Nagorno-Karabakh conflict, noting the organization's "current role in ensuring regional stability." Meeting with OSCE Secretary-General Gian-Carlo Aragona in Vienna last week, Oskanian again stressed that Armenia is not demanding independent status for Nagorno-Karabakh but expects Baku to demonstrate "flexibility" in the search for a "non-conventional" solution to the conflict, according to Noyan Tapan. LF
ARMENIAN PARLIAMENT DEPUTY SPEAKER WITHDRAWS RESIGNATION
Albert Bazeyan, one of the leaders of the majority Yerkrapah group within the Armenian parliament, withdrew his resignation on 14 October after the parliament refused to accept it, RFE/RL's Yerevan bureau reported. Bazeyan had announced his decision to step down on 7 October following an acrimonious debate over opposition demands that the sale of the Yerevan Cognac factory and Armenia's two largest hotels to foreign investors be revoked. During that debate, opposition deputies threatened to demand a vote of no confidence in the government (see "RFE/RL Newsline," 8 October 1998). President Robert Kocharian and Defense Minister Vazgen Sargsian met with Yerkrapah deputies on 12 October and urged Bazeyan to withdraw his resignation. LF
KYRGYZSTAN TO JOIN WTO
The World Trade Organization on 14 October finally voted to invite Kyrgyzstan to join the organization, having agreed on the membership terms, ITAR-TASS and the "Financial Times" reported. Kyrgyzstan will become the first CIS state to be admitted. It must first ratify the accession protocols, under which it must open the country's markets to foreign goods and services. BP
KAZHEGELDIN ANNOUNCES CANDIDACY...
Former Kazakh Prime Minister Akezhan Kazhegeldin on 14 October officially announced his intention to run for president, ITAR-TASS reported. In a formal statement, obtained by RFE/RL's Kazakh Service, Kazhegeldin says Kazakhstan needs change and that Nazarbayev and his "pocket parliament" are "oriented only toward maintaining the personal power of the current president." Kazhegeldin said the parliament's 8 October decision to extend the term in office of future presidents from five to seven years is "shameful," promising to overturn the decision if he is elected president. With regard to the assassination attempt against him the previous day (see "RFE/RL Newsline," 14 October 1998), Kazhegeldin said that he is not afraid and that under no circumstances will he withdraw his candidacy. BP
...WHILE PRESIDENTIAL SPOKESMAN DENIES ASSASSINATION ATTEMPT
Kairat Sarybayev said information about an assassination attempt against Kazhegeldin was released to "raise his [Kazhegeldin's] popularity rating," Interfax reported on 14 October. Sarybayev said "the National Security Committee suggests the shots were fired in the air and Kazhegeldin remained unhurt." He commented that "the methods used by certain politicians for boosting their popularity ratings do not seem to have changed." BP
UKRAINIAN PREMIER TRADES CABINET POSTS FOR PARLIAMENTARY SUPPORT
Valeriy Pustovoytenko has offered jobs in the executive, including in government and state committees, to deputies from seven caucuses of the Supreme Council, Ukrainian Television reported on 14 October. The price for those posts is the creation of an "intercaucus" majority in the parliament to support the government. "Without fail, we will give jobs in our government structures to those who deserve them," he said. Pustovoytenko's offer follows President Leonid Kuchma's announcement the same day that the government will soon be reshuffled. Kuchma said the new appointments will be made "on a purely professional basis," Interfax reported. Kuchma's spokesman, Oleksandr Maydannyk, told journalists that the president has invited the legislature to make "nonstandard proposals" for cabinet posts. JM
LUKASHENKA SAYS BELARUS HAS ENOUGH FOOD FOR WINTER
Belarusian President Alyaksandr Lukashenka reassured the country on 14 October that Belarus has stocked sufficient amounts of foodstuffs for the winter, Interfax reported. Lukashenka said food supplies have doubled, compared with last year. He added that suppliers were instructed "to deliver to retailers in the near future foodstuffs produced elsewhere," and he singled out buckwheat, rice, and sugar. Deputy Prime Minister Leanid Kozik said the government will continue to regulate prices and will not allow them "to collapse." JM
BELARUSIAN DELEGATION IN BELGRADE TO OFFER HELP
A delegation led by Security Council Secretary Viktar Sheyman arrived in Belgrade on 14 October to offer support to Yugoslavia in line with Lukashenka's firm stance on the Kosova crisis, Belarusian Television reported. Lukashenka has granted Sheyman the "broadest powers" to offer "political, economic, and military assistance to Yugoslavia." JM
NEW ESTONIAN FOREIGN MINISTER SWORN IN
Raul Malk, until now Estonian ambassador to the U.K., was sworn in as foreign minister on 14 October, ETA reported. He replaces Toomas Hendrik Ilves, who submitted his resignation last month (see "RFE/RL Newsline," 30 September 1998). Malk, who has no party affiliation, said that finding new export markets for Estonia's "troubled agricultural producers" is an important aspect of Estonia's foreign policy. He added that relations with Russia are another important aspect, commenting that "we have achieved several positive results" in those relations. JC
LATVIA TO JOIN WTO
The World Trade Organization on 14 October unanimously voted to invite Latvia to join the organization, having agreed on the terms of membership. Latvia will become the first Baltic country to become a member of the WTO. It will accede to the organization at the same time as Kyrgyzstan, which is the first CIS country to be invited to join (see Part One). Renato Ruggiero, WTO director-general, commented that the two new members "are paving the way for the entire region." JC
POLAND LAUNCHES PRIVATIZATION OF TELECOMMUNICATIONS GIANT
The Polish government has announced it will start the privatization of Telekomunikacja Polska SA, the country's sole provider of international and inter-city telecommunications links, Polish media reported. Twenty-five percent of shares will be offered from 19 October and 10 November, while another 25-35 percent will be offered to a strategic investor in 1999. The company, who value is put at $5.6-7.4 billion, currently has some 8 million customers. JM
BALCEROWICZ RESPONSIBLE FOR UW'S POOR ELECTION PERFORMANCE?
Jan Krol, parliamentary deputy speaker of the Freedom Union (UW), has hinted that Finance Minister and UW leader Leszek Balcerowicz may be responsible for the party's poor performance in the 11 October local elections, Polish Radio reported on 14 October. Krol suggested that voters may have been put off by Balcerowicz's proposals to introduce a flat tax rate in 2000 and to abolish tax exemptions for individuals building new homes and private investors next year. Meanwhile, Balcerowicz has submitted to the parliament a modified tax reform calling for the reduction of corporate income tax from 36 to 32 percent and the abolition of major tax exemptions but omitting the provision for a flat tax rate. He faces strong opposition to his tax reform from both right-wing and left-wing parties in the legislature. JM
CHECHEN PRESIDENT IN POLAND
Aslan Maskhadov was in Poland on 13 October to attend an international conference on human rights in Warsaw, Polish media reported. Maskhadov was greeted at the airport by a group of deputies and senators, but his visit is considered private by the Polish authorities. At an unofficial meeting with Premier Jerzy Buzek, Maskhadov thanked him for the help Poland gave to Chechnya during the 1994-1996 war. He also told journalists that he takes advantage of each foreign trip to convince international communities that Chechens are "normal people and not terrorists," PAP reported. JM
CZECH DRAFT BUDGET FAILS IN PARLIAMENT
The Czech parliament narrowly rejected the proposed 1999 draft budget on 14 October, CTK reported. The vote was 101 to 97 with two abstentions. The draft, which provides for a deficit of 26.8 billion crowns (some $800 million), was criticized by parliamentary speaker Vaclav Klaus. Prime Minister Milos Zeman said the cabinet will submit a new draft within 30 days, as required by the constitution, and that the government would look for a way to "show this assembly that the uses of this deficit ae for clear growth measures," Reuters reported. PB
SLOW PROGRESS IN SLOVAK COALITION TALKS
Two of the four parties involved in forming a new Slovak government are unhappy with the negotiations to date, TASR and Reuters reported on 14 October. Hungarian Coalition Party (SMK) leader Bela Bugar said "the approach of the Party of the Democratic Left (SDL) is unacceptable" and accused the SDL of attempting to acquire ministerial posts at the expense of the SMK and the Party of Civic Understanding (SOP). SOP spokeswoman Helena Hulmanova said the talks could be more "intensive." PB
NEW SLOVAK GOVERNMENT TO REVIEW RELATIONS WITH RUSSIA
Eduard Kukan, deputy chairman of the Slovak Democratic Coalition, said on 13 October that a main priority of the new government will be to review Bratislava's relations with Moscow, SITA reported. Kukan said Vladimir Meciar's government cultivated relations with Russia that were "out of balance, unsuitable, and out of the ordinary." Kukan, a candidate for foreign minister, said the new cabinet will also review Slovak treaties with Russia. PB
HUNGARY OPENS ITS AIR SPACE TO NATO
The parliament on 14 October voted overwhelmingly to allow NATO to use Hungarian airspace without restrictions, Hungarian media reported. The vote was 260 to 11 with six abstentions. Foreign Minister Janos Martonyi said before the vote that NATO Secretary-General Javier Solana has sent a letter to Prime Minister Viktor Orban assuring him of NATO guarantees for Hungary in the event of threats from Yugoslavia. Hungary is ready "in principle" to send observers to the future OSCE mission in Kosova, Foreign Ministry spokesman Gabor Horvath told journalists. MSZ
SOLANA SAYS SERBS NOT COMPLYING
NATO Secretary-General Javier Solana said in Brussels on 15 October that Yugoslav security forces have not complied with UN Security Council Resolution 1199's provision that they withdraw from the province, Reuters reported. "The information we have at this very moment, this morning, is that still compliance is not a reality," he said. Solana added that he will probably sign a document on verifying the latest agreement on Kosova with Yugoslav President Slobodan Milosevic in Belgrade within one day (see "RFE/RL Newsline," 13 October 1998). The NATO leader said he will tell Milosevic that "the solution [to the Kosova problem] is not in signing papers" and that the Yugoslav leader must live up to his commitments. An unnamed NATO official told AFP on 14 October that the alliance "will be looking for clear indications of actions, dismantling checkpoints, moving forces back to their barracks, lifting the heavy-handed repression from the backs of the civilian population." PM
KOSOVAR SHADOW-STATE CRITICIZES AGREEMENT...
Veton Surroi, who is Kosova's leading journalist and a member of the Kosovar shadow- state's negotiating team with the Serbs, told AFP on 14 October that the Milosevic-Holbrooke agreement leaves Kosova a "Serbian camp [that is] under land and aerial surveillance." In Prishtina, shadow-state President Ibrahim Rugova said that some of the concessions U.S. special envoy Richard Holbrooke obtained from Milosevic will help "calm the situation," but he stressed that NATO ground troops should go to Kosova to help protect the ethnic Albanians from Serbian security forces, the "Financial Times" wrote on 15 October. Rugova and his negotiating team played only a marginal role in negotiating the Milosevic-Holbrooke pact, the "Sueddeutsche Zeitung" added. PM
...AS DOES UCK
Bardhyl Mahmuti, who is a spokesman for the Kosova Liberation Army (UCK), said on 14 October in Geneva that the agreement is unacceptable because it allows the Serbian authorities to determine the timetable and rules for any future elections. He said the Kosovars will decide themselves when and how to organize their political system. The spokesman also charged that Serbian forces continue to shell Kosovar villages and that "Milosevic is playing the same old game" of breaking his promises to foreigners. Mahmuti stressed that any agreement involving Kosova must have the approval of the UCK and that Holbrooke did not negotiate with the UCK. "The group of people [around Rugova]...with whom the Americans are negotiating are not legitimate for us. No deal will succeed if there is no agreement with the UCK." In Tirana, the daily "Albania," which is close to the Democratic Party, wrote that the Kosovars "are being treated like a defeated people." PM
SESELJ PRAISES PACT
Serbian Deputy Prime Minister Vojislav Seselj hailed Milosevic for making only "minimal concessions" to Holbrooke and for "defending the territorial integrity and sovereignty" of Serbia, AFP reported from Belgrade on 14 October. In Podgorica, President Milo Djukanovic said that the possibility of military intervention against Yugoslavia remains and that Milosevic must keep the promises he has made, RFE/RL's South Slavic Service reported. In Sarajevo, Zivko Radisic, who is the Serbian member of the Bosnian joint presidency, said that the Milosevic-Holbrooke agreement is essential for maintaining peace and stability in the region, Reuters reported. He stressed that any conflict in Kosova could seriously endanger the security of Europe as a whole. Radisic added that Kosova "was and remains the cradle of Serbian statehood and spirit." PM
JOURNALISTS DENOUNCE CRACKDOWN
Slavko Curuvija, who is the editor in chief of the recently banned independent Belgrade "Dnevni telegraf," wrote Milosevic on 14 October to protest the shutdown of his newspaper (see "RFE/RL Newsline," 14 October 1998). He noted that "there were cases in Serbian history of confiscating newspapers and arresting journalists, but never one of sacking an editorial board. Nor were there cases, during the monarchy or under communist rule, of representatives of any ministry directly editing the news with the aid of the police." Curuvija appealed to Milosevic to overrule the Serbian authorities, who, he charged, think "they can make a modern Serbia with citizens who are deaf, dumb, and blind." That same day, police evicted Curuvija from his office. The editor told the "Financial Times" that "they are fascists." In New York, the Committee to Protect Journalists appealed to leaders of the international community to "offer the strongest possible support to [Serbia's] besieged journalists." PM
ARBOUR SAYS MILOSEVIC HAS NO AUTHORITY OVER COURT
Louise Arbour, who is the chief prosecutor for the Hague-based war crimes tribunal, said at the UN in New York on 14 October that the Yugoslav president has no authority over where and how the tribunal's representatives may work: "The jurisdiction of the International Criminal Tribunal on the former Yugoslavia is not for Mr. Milosevic to decide, nor is it subject to negotiations between him and anyone else." She noted that the Serbian authorities have granted visas to three members of her staff that had been pending for several weeks. She added that she will soon request that a larger number of persons be granted visas to investigate possible atrocities in Kosova, Reuters reported. PM
TUDJMAN NAMES GENERAL TO HEAD MINISTRY
Croatian President Franjo Tudjman on 14 October relieved General Pavao Miljavac of his military duties and appointed him defense minister. He succeeds Andrija Hebrang, who quit after losing a power struggle with mainly Herzegovinian hard-liners (see "RFE/RL Newsline," 13 October 1998). An unnamed Western diplomat told Reuters that Miljavac is a "nice guy...who will have the same enemies as Hebrang." Observers noted that Croatia is unlikely to win admission to Euro-Atlantic structures, especially to NATO's Partnership for Peace Program, if the Defense Ministry continues to operate like "a Herzegovinian-run state-within-a state." PM
SLOVENIAN DEFENSE MINISTER ASKED TO QUIT
Prime Minister Janez Drnovsek on 14 October asked Defense Minister Alojz Krapez to resign in the interests of preserving the governing coalition. The minister said he will make a decision by 16 October. Krapez is involved in a scandal because he illegally acquired the right to use an apartment owned by his ministry. The Slovenian People's Party, which is a small member of the governing coalition, has called on Krapez to resign over the affair. PM
ROMANIAN PARLIAMENT APPROVES LIMITED ACCESS FOR NATO PLANES
A joint session of the parliament has approved the government's decision to allow NATO limited access to the country's air space in case of military action by the alliance in neighboring Yugoslavia, Reuters reported on 14 October. The vote, which was 244 to 160 with 82 abstentions, will allow NATO planes to fly over Romania in case of emergencies or "unforeseen situations." The opposition, led by the Party of Social Democracy in Romania (PDSR), was almost united in opposing the decision. Former President and PDSR leader Ion Iliescu said "fortunately, the U.S. and Holbrooke's perseverance has helped us preserve our dignity." PB
ROMANIAN HUMAN RIGHTS ACTIVIST KILLED
Stefan Itoafa, an attorney and human rights activist, has been murdered in Constanza, AFP reported on 14 October. Itoafa was stabbed and his throat cut. No other details are available at present. PB
MOLDOVA IN LINE FOR IMF FUNDS
Mark Horton, the IMF representative in Chisinau, said on 14 October that Moldova has a good chance of receiving aid from the fund by the end of this year, Infotag reported. Horton said such a loan would be dependent upon "progress in cutting budgetary expenditures" and steps toward privatizing the energy sector. The IMF is holding a $28 million loan for Moldova while the World Bank has frozen a $35 million loan. The IMF also advised the Moldovan National Bank to soften its intervention on the foreign exchange market in an effort to support the leu, which has fallen rapidly in the past few days. PB
BULGARIA AGREES TO KEEP FINANCIAL SYSTEM OPEN
The IMF on 14 October announced that Bulgaria has agreed to adhere to the fund's Article 4, an RFE/RL correspondent in Washington reported. Bulgaria is the 146th country to approve Article 4, which prohibits it from discriminating against a foreign currency or imposing restrictions on payments and transfers involving international transactions. This is considered a major step toward integrating into the global economy. PB
IMF, UKRAINIAN LEADERS DISCUSS REFORMS
by Lily Hyde
Since Ukraine's recent agreement on a reform program with the IMF, the country has been hit by new economic problems. Some Kyiv-based international financial experts say this is complicating Ukraine's efforts to fulfill the program's aims.
A Ukrainian delegation, including Prime Minister Valeriy Pustovoytenko, Finance Minister Ihor Mityukov, and National Bank Governor Viktor Yushchenko, met with IMF officials in Washington recently. They discussed what must be done to obtain further tranches of a $2.2 billion loan that are attached to the reform program.
An outline of the program is posted on the IMF's web site. It includes steps to ensure progress in stabilization, to create a smaller and more efficient government, to accelerate deregulation and privatization, and to reform the financial sector. Other measures are restructuring key economic sectors, increasing competition, and improving protections for the most vulnerable members of society.
Aleksei Sekarev, an economic adviser with the Ukrainian- European Policy and Legal Advice Center, calls it "a very ambitious program for Ukraine." His research center is funded by the EU. Sekarev says that it will be "very difficult for Ukraine to fulfill many of the conditions." But he says he believes that there is "a readiness on the part of the IMF" to be realistic about how many of the conditions can be met.
Ukraine's program for economic revival underwent drastic modification even as it was supposed to be getting off the ground. By the time the government and the IMF board of directors reached a final agreement on the loan on 4 September, the Russian financial crisis had hit and many of the financial benchmarks written into original plans had become unrealistic.
In a letter to the IMF, the government indicated it would not be able to replenish the Ukrainian National Bank's depleted reserves as earlier promised. The letter also mentioned a new exchange rate band of 2.5-3.5 hryvna to the dollar, effectively devaluing the national currency.
The government also introduced a new set of financial benchmarks, including ones on gross domestic product, consumer price inflation, the state budget deficit, money supply, and foreign currency reserves.
Since then, the economic situation has deteriorated further. At the end of September, the National Bank's foreign reserves stood at $1.08 billion, some $250 million short of the target.
Patricia Bartholomew, an economist at the Kyiv office of Germany's Commerzbank, says she expects more problems ahead. "Ukraine needs to develop a competitive economy, but there has been trouble getting legislation through the parliament." She expresses the view that the situation in Ukraine will "continue to frustrate the IMF."
The parliament has already postponed discussion of the budget until 15 October and is unlikely to approve it. Since July, Ukraine has issued seemingly inconsistent presidential and cabinet decrees, some in line with goals agreed with the IMF, some taking a side-ways step, and some directly in opposition.
The clear conflict is between measures toward deregulation and steps that allow for government intervention in the economy, such as protecting Ukrainian-produced goods, writing off tax arrears, and expanding the list of excise exemptions on local goods.
Sekarev of the EU-funded research center speculates that the IMF may be willing to overlook measures that contradict the spirit of IMF policy as long as they do not contradict agreed conditions and as long as most legislation remains consistent with agreed reforms.
IMF officials say that production goals and other targets and deadlines in the government's memorandum to the IMF are flexible.
Patrick Lenain, the IMF's top official in Kyiv, says "we know we have to remain flexible and we have to adjust". He said IMF officials know that "a lot is not going to happen, or it will happen faster, or slower" than planned and new measures may be necessary. Lenain went on to say that if criteria are not complied with, IMF officials will consider waivers.
While quarterly reviews will look at long-term trends, the IMF will also review Ukraine's progress before deciding to release each monthly tranche of the loan. The frequency may be an indicator that the IMF has doubts about Ukraine's ability to keep its promises. Only Russia has disbursements with the same frequency; other IMF country loans are regulated quarterly or even half-yearly.
The IMF money is critical to balancing Ukraine's budget, servicing high-interest government debts, paying for imports, and maintaining the hryvna as a viable currency. Moreover, loans from the World Bank are conditioned on the government keeping to the IMF program, and private lenders and investors rely heavily on the IMF as an indicator of Ukraine's economic prospects.
Commerzbank's Bartholomew expresses the view that "the IMF is in a very difficult position." She says "they do not want to seem too strict, they are trying to get as much reform through as possible without pushing it too far and causing a backlash against reform. But," she says, "they also don't want to be seen as a pushover." The author is an RFE/RL correspondent based in Kyiv.